UC-NRLF 


HT> 


I 


SB    3T    273 


S9I  Swift  &  Company's 

Analysis  and  Criticism 


of 


PART  II 


of  the 


Report  of  the 

Federal  Trade  Commission 


on  the 


Meat  Packing  Industry 


of 


November  25,  1918 


Issued 
April  5,  1919 


FOREWORD 


The  investigation  of  the  packing  industry  by  the  Fed- 
eral Trade  Commission  was  one-sided.  The  charge  that 
the  packers  have  a  monopoly  is  not  founded  upon  fact. 
In  its  report,  the  Federal  Trade  Commission  has  pre- 
sented only  such  information  as  could  be  used,  by  means 
of  wrongful  interpretation  and  insinuation,  to  make  out 
a  case  against  the  packers. 

The  Trade  Commission  had  free  access  to  Swift  &  Com- 
pany's files,  and  in  publishing  letters  and  telegrams 
taken  therefrom,  the  Commission  has  actually  failed  to 
reproduce  in  its  report  letters  and  telegrams — and  even 
parts  of.  telegrams — which  controvert  some  of  the  very 
contentions  that  it  tries  to  establish. 

In  many  cases,  the  Trade  Commission  has  described 
perfectly  proper  practices  and  transactions  in  such  a  way 
as  to  make  them  appear  illegitimate ;  it  has  given  undue 
importance  to  trivial  matters,  and  has  failed  to  even  men- 
tion other  matters  of  vital  importance ;  by  a  subtle  method 
of  insinuation  and  suggestion,  the  Trade  Commission  has 
in  many  instances  given  the  effect  of  dogmatic  assertion. 

Proof  of  the  foregoing  statements  may  be  found  in  the 
following  Analysis  of  Part  II  of  the  Federal  Trade  Com- 
mission's Report  on  the  Meat  Packing  Industry.  Aside 
from  a  Summary,  this  is  the  only  part  of  the  complete 
report  that  had  appeared  at  the  time  this  Analysis  was 
prepared. 

This  Part  II  of  the  Report  is  supposed  to  present  suf- 
ficient evidence  to  warrant  the  conclusion  of  the  Commis- 
sion that  the  five  large  packers  have  a  combination  in 
restraint  of  trade.  Swift  &  Company  denies  that  it  has 
any  agreements  or  understandings  with  other  packers  to 
affect  prices  of  live  stock  or  meats,  and  shows  in  this 
Analysis  that  the  Trade  Commission  has  failed  to  prove 
its  case. 


CONTENTS 


Page 

FOREWORD     3 

INTRODUCTION     5 

One-sided    Character   of   the    Investigation    6 

EARLY    POOLS   AND   THE    NATIONAL    PACKING   COMPANY..  10 

National  Packing  Company    12 

THE    ALLEGED    COMBINATION    OF  TODAY    15 

Summary  of  Trade  Commission's  Conclusions  as  to  Monopoly  15 

The   Alleged   "Live-stock   Pool"    17 

Centralized  Buying  System    23 

Evidence  from  Packer  Buyers  4. 25 

Packer  Exchange   of  Information    25 

Approximate  Uniformity  of  Purchase  Percentages — The  Real 

Explanation 27 

The  Situation  at  St.  Joseph 31 

The  St.  Paul  Situation 33 

The  Situation  at  Omaha  and  Sioux  City 36 

The  Situations  at  Oklahoma  City,  Fort  Worth,  and  Denver 37 

Conclusion  on  Alleged  Live-stock  Pool 39 

Alleged  Collusion  in  Live-stock  Buying 42 

"Part  Purchases" 42 

"Split   Shipments" 48 

"Wiring  on"    52 

Alleged  "Making"  the  Daily  Market   57 

International    Meat    Pool    62 

Alleged    Collusion   in   Selling   Meat    Products   in    the   United 

States    65 

Alleged    Collusive    Action    toward    Small    Competitors 69 

The  California  Situation   71 

ALLEGED  AGREEMENTS   IN   OTHER   LINES   81 

The  Real  Facts  about  Alleged  Lard  Compound  Agreement.  ...  81 

Alleged  Collusion  in  Cheese  Business   83 

Alleged  Agreements  in  Creamery  and  Butter  Industry 84 

Alleged  Division  of  Territory  in  Poultry,  Egg,  and  Butter  Buy- 
ing     92 

Alleged  Combinations  in  the  Rendering  Business. 94 

Formation  of  Wilson  &  Company — and  the  Sulzberger  Mem- 
oranda ..  97 


AN  AL  YS  IS 


.  OF 
PART  II 

OF  THE 


Report  of  the  Federal  Trade  Commis 
sion  on  the  Meat- Packing  Industry 


INTRODUCTION. 

Part  II  of  the  Federal  Trade  Commission's  report  on 
the  meat  industry  deals  with  "evidence  of  combination 
among  packers, "  and  is  supposed  to  present  sufficient 
evidence  to  warrant  the  conclusion  of  the  Trade  Commis- 
sion that  the  five  large  packing  companies  have  a  com- 
bination in  restraint  of  trade. 

Aside  from  a  "Summary"  of  the  Federal  Trade  Com- 
mission's report,  which  was  issued  under  date  of  July 
3rd,  this  Part  II  is  the  first  instalment  of  the  complete 
report  that  has  appeared ;  but  it  is  undoubtedly  the  most 
important,  because  the  most  fundamental  question  in  con- 
nection with  the  whole  packing  industry  is  as  to  whether 
there  is  a  monopoly,  or  whether  there  are  any  illegal 
agreements  among  the  large  packers. 

It  is  on  the  theory  that  the  Federal  Trade  Commis- 
sion's conclusions  are  correct  that  legislation  providing 
for  the  regulation  of  the  packing  industry  has  been  de- 


I 

manded  at  Washington.  It  is  therefore  of  extreme  im- 
portance to  analyze  the  so-called  "evidence  of  combina- 
tion" in  order  to  find  out  whether  the  Trade  Commis- 
sion's conclusion  is  sound. 

This  analysis  will  establish  the  fact  that  the  evidence 
contained  in  Part  II  of  the  Federal  Trade  Commission's 
report  is  not  sufficient  to  warrant  the  Trade  Commission 
in  its  conclusion  that  a  monopoly  exists.  It  will  also  be 
shown  that  in  trying  to  make  out  a  case  against  the  pack- 
ers the  Federal  Trade  Commission  omitted  correspond- 
ence taken  from  Swift  &  Company's  files,  as  well  as  easily 
ascertainable  facts,  which  completely  controvert  conten- 
tions made  by  the  Commission  in  its  report. 

It  will  also  be  showr  that  the  Federal  Trade  Commis- 
sion has  described  perf'^cMy  sound  business  practices  in 
such  a  way  as  to  make  them  appear  illegitimate;  that  the 
report  is  replete  with  insinuations  and  wrongful  inter- 
pretation of  facts ;  and  that  it  contains  actual  inaccuracies 
in  its  figures  and  statements. 

One-sided  Character  of  tke  Investigation. 

The  Federal  Trade  Commission  was  supposed  to  make 
an  impartial  investigation  of  the  packing  industry,  and 
at  first  it  appeared  that  this  was  the  intention  of  the  Com- 
mission. It  soon  developed,  however,  that  the  Trade 
Commission  was  seeking  only  such  information  as  it  could 
use,  by  adroit  and  ingenious  interpretation,  in  making  out 
a  case  against  the  packing  industry,  and  that  it  was  not 
seeking  facts  and  explanations  from  the  packers  which 
would  place  the  information  collected  in  its  true  light. 

This  one-sided  character  of  the  investigation  was  evi- 
dent from  the  manner  in  which  public  hearings  were  held. 
In  the  first  place,  the  Commission  employed  the  services 


of  an  attorney  who  had  gained  his  reputation  as  a  pros- 
ecuting attorney,  and  who  at  once  began  to  perform  in 
practically  that  capacity  for  the  Commission.  At  the 
hearings  there  were  produced  witnesses  who  had  been 
sought  out  by  the  Federal  Trade  Commission,  who  tes- 
tified against  the  packers.  The  packers  were  not  per- 
mitted, however,  through  legal  counsel  to  cross-examine 
such  prejudiced  witnesses.  They  could  not  produce  wit- 
nesses who,  through  cross-examination,  would  controvert 
evidence  of  prejudiced  witnesses,  and  they  could  not 
cross-examine  witnesses  of  their  own  to  substantiate  the 
facts  which  they  might  have  produced.  It  is  true  that 
representatives  of  the  packers  might  have  appeared  at 
these  hearings,  but  since  they  would  have  been  subject  to 
cross-examination  by  a  hostile  attorney,  and  since  they 
had  no  right  of  cross-examining  witnesses  themselves  or 
through  counsel,  they  naturally  did  not  care  to  submit 
to  any  such  unjust  procedure. 

That  this  is  a  true  description  of  the  character  of  the 
hearings  is  substantiated  bv  the  following  statements  by 
Mr.  Francis  J.  Heney,  attorney  for  the  Trade  Commis- 
sion, in  public  hearings  at  Boston,  on  December  28,  191 7 : 

"Commissioner  Murdock:  This  meeting  will  come  to  order. 
This  is  a  hearing  held  by  the- Federal  Trade  Commission  under  the 
direction  of  the  President  of  the  United  States,  and  the  authority 
of  Congress,  in  an  inquiry  into  the  food  products  of  the  country, 
and  the  high  cost  of  living. 

•'Proceed.  Mr.  Heney. 

"Mr.  Heney:  Mr.  Commissioner,  I  should  like  to  ask  for  an 
order  at  this  time  excluding  all  witnesses  from  the  room  with  the 
exception  of  the  witness  who  is  being  examined,  following  the  same 
policy  we  followed  in  Washington  at  the  commencement  of  the 
hearings. 

"Commissioner  Murdock:     That  order  will  be  made. 

"Mr.  Heney:  I  think  it  might  be  well  for  me  to  state  for  the 
benefit  of  the  members  of  the  press,  that  this  investigation  is  not 
a  trial  in  which  any  parties  are  defendants  and  thereby  entitled 
to  appear  by  attorney.  It  is  an  investigation  into  the  economic 
conditions,  as  well  as  practices  that  may  be  prevailing,  and  it  is 
ex-parte,  and  while  the  Commission  will  be  glad  to  hear  any  wit- 
ness that  presents  himself  here,  no  one  comes  here  with  the  right 
to  be  represented  by  attorneys,  with  the  Tight  to  -put  orTwitnesses, 
because  there  is  no  investigation  of  that  sort  being  conducted. " 


8 

In  further  support  of  our  contention  that  we  were  not 
given  a  fair  hearing,  it  is  significant  that  Mr.  Colver, 
himself,  Chairman  of  the  Federal  Trade  Commission, 
acknowledged  to  the  House  Committee  on  Interstate  and 
Foreign  Commerce,  on  December  19,  1918,  that  the  hear- 
ings had  been  ex-parte  in  character. 

Another  evidence  of  the  unfair  and  one-sided  methods 
of  investigation  used  by  the  Federal  Trade  Commission 
is  the  manner  in  which  agents  of  ~  the  Commission  went 
through  the  private  files  of  Swift  &  Company  and  used 
in  the  report  only  such  communications  as  would  appear 
to  make  out  a  case  against  the  packing  industry.  Public 
hearings  were  being  held  while  the  files  were  being  ran- 
sacked, and  scraps  of  correspondence  were  taken  to  the 
hearings  and  read  into  the  public  record,  not  only  without 
adequate  explanation,  but  with  positively  wrongful  in- 
terpretations and  misleading  insinuations.  This  practice 
resulted  in  sensational  items  in  the  newspapers,  and  an 
inflaming  of  the  prejudice  that  exists  in  the  minds  of 
many  people  against  the  packers.  It  hardly  seems  to 
Swift  &  Company  that  this  is  a  dignified  and  scientific 
method  for  a  department  of  the  Government  to  use  in 
making  what. was  supposed  to  be  a  fair  and  impartial 
investigation. 

Whatever  may  be  thought  of  the  fairness  and  impar- 
tiality of  the  methods  of  investigation,  however,  the  im- 
portant point  is  that  the  report  itself  is  one-sided.  Even 
if  the  Commission  felt  justified  in  its  conclusion  that 
monopoly  existed,  its  report  should  have  contained  the 
evidence  on  both  sides  of  the  question.  But  no!  The 
report  is  practically  the  brief  of  a  prosecuting  attorney. 
It  contains  only  such  evidence  as  can,  by  wrongful  inter- 
pretation, appear  to  indicate  illegal  collusion  among  the 
packers.  It  fails  to  produce  scores  of  positive  evidences 


of  active  competition.  And,  as  mentioned  above,  the 
Commission  has  actually  refrained  from  publishing  let- 
ters that  were  taken  from  our  files,  and  which  controvert 
statements  and  insinuations  made  in  the  report.  In  some 
cases,  it  has  actually  used  only  such  parts  of  telegrams, 
taken  from  our  files,  as  appear  to  bear  out  its  case,  omit- 
ting items  from  the  same  telegrams  which  were  not  useful 
to  the  Commission. 

These  are  serious  charges  to  make  against  a  depart- 
ment of  the  Government.    Their  proof  will  be  found  in 

the  analvsis  that  follows. 


10 


EARLY  POOLS  AND  THE  NATIONAL  PACKING 

COMPANY. 

Pages  Chapter  I  presents  a  history  of  the  so-called  beef  pools, 
1 1  to  25  which  were  in  existence  before  1902,  and  of  the  National 
Packing  Co.,  which  was  in  existence  from  1902  to  1912. 
The  object  of  the  Commission  in  going  into  this  past 
history  is  apparently  to  show  that  there  was  a  disposition 
on  the  part  of  the  packers  to  work  together  in  the  past, 
and  to  try  to  link  these  early  events  with  the  alleged 
present-day  agreement  to  divide  live-stock  receipts.  Th^ 
Commission  says  on  page  11  of  the  Report : 

"These  admitted  agreements  of  the  past  are  a  key  to  the  evi- 
dence of  agreements  and  combinations  of  the  present  time." 

This  evidence  is  only  of  historic  interest,  however,  unless 
the  Trade  Commission  can  prove  that  the  early  day  agree 
ments  have  been  continuous.  It  is  on  this  point  that  the 
Trade  Commission  has  necessarily  fallen  down,  in  spite 
of  bold  and  unwarranted  interpretation  of  scattered  data 
whi;  h  are  supposed  to  indicate  the  existence  of  arrange- 
ments continuing  through  the  days  of  the  National  Pack- 
ing Company  and  since  the  dissolution  of  that  company. 

It  is  perfectly  true  that  for  several  years  previous  to 
190?  the  large  packers  had  arrangements  which  have  be?n 
referred  to  as  "beef  pools"  or  the  "Veeder  pools." 
Under  these  arrangements  a  central  bureau  decided  from 
week  to  week  how  much  fresh  beef  should  be  shipped  to 
the  several  eastern  markets.  The  object  was  to  prevent 
recurrent  gluts  and  scarcities  therein.  The  economic 
effects  of  such  an  arrangement  on  the  public  as  a  whole 
were  undoubtedly  beneficial,  as  it  probably  had  some 
effect  in  stabilizing  prices  through  the  regulation  of  sup- 
ply in  accordance  with  demand.  It  might  be  added  that 


11 

the  experiences  under  the  pooling  arrangements  showed 
the  futility  of  attempting  to  fix  the  prices  of  such  a  per- 
ishable commodity  as  fresh  beef. 

The  beef  pools  were  discontinued  in  1902 — but  not 
because  they  -were  declared  illegal!  The  Federal 
Page  is  Government  had  filed  a  bill  asking  for  an  injunction  to 
prevent  the  packers  from  having  agreements  in  illegal 
restraint  of  trade.  Swift  &  Company  preferred  to  dis- 
continue the  arrangement,  because  of  public  criticism, 
and  did  not  contest  the  bill.  The  injunctional  order  was 
issued,  and  was  afterwards  affirmed  by  the  Supreme 
Court  of  the  United  States,  but  the  injunction  itself  con- 
tained the  following  clause: 

"Nothing  herein  shall  be  construed  to  prohibit  the  said  defend- 
ants       from  curtailing  the  quantity  of  meats 

shipped  to  a  given  market  where  the  purpose  of  such  arrangement 
in  good  faith  is  to  prevent  the  over-accumulation  of  meats  as 
perishable  articles  in  such  markets."  (1) 

In  other  words,  the  injunctional  order  expressly  per- 
mitted the  continuance  of  the  very  pools  against  which 
the  agitation  at  that  time  had  been  waged.  In  spite  of 
this  fact,  the  packers  preferred  to  discontinue  the  ar- 
rangement, because  of  popular  misunderstanding  and  dis- 
approval. This  explanation  is  of  special  significance  be- 
cause the  Federal  Trade  Commission  has  tried  to  make 
so  much  capital  out  of  the  fact  that  the  packers  had 
pooling  arrangements  prior  to  1902.  At  the  time  the 
Veeder  pool  was  abandoned,  seventeen  years  ago,  Swift 
£  Company  definitely  and  absolutely  ceased  to  have  rela- 
tions with  other  packers  leading  to  the  allocation  of  beef 
shipments  or  to  any  other  form  of  agreement  which  might 
be  construed  as  in  restraint  of  trade.  As  evidence  of 
Swift  &  Company's  earnest  efforts  to  carry  out  this  policy, 
there  have  been  sent  to  the  various  department  heads,  at 
intervals  of  about  six  months,  ever  since  that  time,  a  copy 

(1)      196  U.  S.  375. 


12 

of  the  injunction,  with  the  following  letter  of  instructions, 
and  the  receipt  that  must  be  signed : 

Instructions  issued  periodically  by  Mr.  L.  F.  Swift  to 
Department  Managers  of  Swift  &  Company: 

September  5,  1918 
Letter  No.  1979. 
Dear  Sir: 

Enclosed  please  find  copy  of  decree  of  May  26th,  1903,  as  modified 
by  the  Supreme  Court,  in  which  the  injunction  issued  in  the  suit 
of  the  United  States  v.  Swift  &  Company  and  others,  is  made 
permanent. 

We  again  bring  this  to  your  attention  and  advise  you  that  you 
are  absolutely  prohibited  from  entering  into  any  agreement  or 
combination,  either  personally  or  for  Swift  and  Company,  which 
will  in  any  manner  violate  the  injunction  or  the  Sherman  Anti- 
trust Law. 

This  letter  and  copy  of  injunction  bear  serial  numbers,  and 
are  to  be  retained  for  your  files. 

Please   acknowledge   receipt   of  both   documents   on   the   blank 
enclosed  for  that  purpose. 
Awaiting  your  reply. 

Yours  truly, 

SWIFT  &  COMPANY, 

L.  F.  Swift, 
President. 


Place  

Date   

Swift  &  Company,  . . 

Union  Stock  Yards,  Chicago. 
Dear  Sirs: 

I  acknowledge  receipt  of  your  letter  under  date  of  Sept.  5,  1918, 
together  with  copy  of  injunction  issued  in  suit  of  the  United  States 
v.  Swift  &  Company  and  others,  both  bearing  Serial  Number  1979. 
I  shall  be  governed  by  the  instructions  contained  therein. 
Yours  respectfully, 

(Signature)    

(Address)    

Must  be  signed  personally  by 
person  to  whom  addressed. 


National  Packing  Company. 

Pages         it  is  true  that  in  1902  the  three  largest  packers  planned 
22  to  25   to  merge  their  interests  in  a  single  large  corporation,  to- 
gether with  a  number  of  small  packing  companies.    The 
proposed  consolidation  was  similar  to  those  taking  place 


13 

at  that  time  in  other  industries,  such  as  the  U.  S.  Steel 
Corporation;  but  the  plan  never  went  through,  because 
of  difficulties  that  arose  in  connection  with  the  financing. 
The  result  was  that  no  single  predominating  corporation 
has  ever  been  formed  in  the  packing  industry  such  as  are 
so  common  in  other  industries. 

While  the  negotiations  for  the  proposed  merger  were 
under  way  several  small  packing  companies  were  bought 
up  by  Mr.  Swift,  Mr.  Armour,  and  Mr.  Morris,  with  the 
intention  of  including  them  in  the  new  company.  On  the 
failure  to  carry  through  the  proposed  plan  these  small 
companies  were  organized  into  the  National  Packing 
Company,  the  stock  of  which  was  taken  by  the  three  large 
packers  interested,  on  the  basis  which  had  been  agreed 
upon  for  the  merger,  i.  e.,  the  basis  of  the  tangible  assets 
of  the  three  large  packing  companies. 

It  is  undoubtedly  true  that  the  directors  of  the  National 
Packing  Company  discussed  matters  of  general  trade  in- 
terest at  their  regular  meetings,  but  there  is  absolutely  no 
evidence  or  reason  to  suppose  that  such  informal  discus- 
sion as  they  may  have  had  constituted  an  agreement  of 
any  form,  or  amounted  to  any  illegal  collusive  action. 
This  very  question  was  before  the  courts  in  the  case  of  the 
United  States  v.  L.  F.  Swift  et  al.,  which  was  decided  in 
1912.  and  which  acquitted  the  defendants  of  having  any 
illegal  combination  in  restraint  of  trade.  In  fact,  it  was 
even  contended  by  the  Government  in  trying  that  case 
that  the  fairly  constant  percentages  of  purchases,  taken 
by  the  various  packers,  were  evidence  of  agreements  to 
divide  live-stock  receipts.  And  the  packers  were  declared 
1  'not  guilty"!  It  is  on  this  same  charge  that  the  Federal 
Trade  Commission  now  bases  its  conclusion  that  the 
packers  have  an  agreement  in  restraint  of  trade. 

The  National  Packing  Company,  although  it  was  never 


14 

declared  illegal,  was  dissolved  in  1912,  and  the  properties 
were  sold  to  the  Swift,  Armour,  and  Morris  companies. 
The  National  Packing  Company  had  not  been  particularly 
successful  financially,  and  strange  as  it  may  seem  it  had 
actually  been  a  thorn  in  the  side  of  the  other  large  pack- 
ers from  a  competitive  .standpoint. 

Even  if  there  had  been  an  illegal  arrangement  during 
the  days  of  the  National  Packing  Company,  that  would 
have  little  if  any  bearing  on  the  situation  today;  but 
there  were  not  agreements  in  restraint  of  trade  at  that 
time,  as  decided  by  the  courts, — and  this  is  a  significant 
fact  inasmuch  as  the  Federal  Trade  Commission  at- 
tempts to  show  that  there  has  been  a  continuing  arrange- 
ment, though  changing  somewhat  in  form,  from  the  earli- 
est days  to  the  present  time. 


15 


THE  AIXEGED   COMBINATION  OF  TODAY. 

Summary   of   Trade    Commission's    Conclusions    as 
to  Monopoly. 

pages  Qn  pages  26  and  27  of  the  Report,  the  Federal  Trade 
26  to  27  Commission  summarizes  the  principal  charges  which  are 
'supposed  to  prove  that  the  five  large  packers  have  a  con- 
spiracy in  restraint  of  trade.  The  Trade  Commission  in- 
forms us  that — "this  evidence  is  convincing,  consisting 
as  it  does  largely  of  documents  written  by  the  packers/' 
etc.  We  admit  that  on  its  face  the  evidence  might  well 
appear  convincing  to  the  uninitiated  and  to  the  person 
who  does  not  know  that  the  evid?nce  has  been  hand-picked 
for  the  purpose  of  bringing  out  only  one  side  of  the  case. 
AVe  submit,  however,  that  a  careful  analysis  even  of  this 
one-sided  evidence  reveals  no  proof  of  agreements  in  re- 
straint of  trade.  It  is  only  through  constant  repetition, 
ingenious  interpretation  of  the  evidence,  and  bold  as- 
sertion and  assumption,  that  this  evidence  appears  con- 
vincing even  to  the  person  who  has  not  really  studied  the 
matter. 

The  Federal  Trade  Commission  bases  its  monopoly 
charge  on  the  following  conclusions: 

I. 

That  thn  five  large  packers  "are  in  an  agreement  for 
the  division  of  live  stock  purchases  throughout  the  United 
States  according  to  certain  fixed  percentages." 


16 


II. 

That  the  five  large  companies  "exchange  confidential 
inf ormation ' '  and  "eniploy  jointly  paid  agents  to  secure 
information  which  is  used  to  control  and  manipulate  live- 
stock markets." 

III. 

That  the  five  companies  "act  collusively  through  their 
buyers  by  means  of  such  practices  as 

(a)  'Split-shipments'  purchases; 

(b)  4part  purchases'; 

(c)  l wiring  on'; 

(d)  ' Making'  the  daily  market." 

(These  practices  will  be  described  and  discussed  in 
detail  below.) 

IV. 

That  Swift,  Armour,  Morris,  and  Wilson  have  com- 
bined with  certain  other  companies  to  restrict  and  control 
shipments  from  South  America  to  the  United  States  and 
other  countries. 

V. 

That  the  large  packers  act  collusively  in  the  sale  of 
fresh  meat. 

VI. 

That  there  is  a  joint  contribution  to  funds  by  the  five 
large  packers. 

VII. 

That  there  is  joint  ownership  of  various  enterprises. 

These  conclusions  will  be  discussed  in  the  order  that 
they  are  taken  up  in  the  Commission's  report.  It  will  be 
shown  that  there  is  no  evidence  to  support  the  charge  of 


17 

collusion  in  an  illegal  or  uncommercial  way ;  that  many  of 
the  practices  described  are  perfectly  legitimate ;  and  that 
it  is  only  by  wrongful  interpretation  and  insinuation  that 
they  are  made  to  appear  as  illegitimate. 

The  Alleged  "Live-stock  Pool." 

pages  The  Federal  Trade  Commission  practically  bases  its 
27  and28  monopoly  charge  on  the  fact  that  the  percentage  of  live 
stock  bought  by  each  packer  at  the  different  markets,  and 
for  all  markets  together,  remains  fairly  constant  from 
year  to  year.  It  introduces  the  discussion  of  this  subject 
by  referring  to  1 1  control  of  shipments  and  prices  of  fresh 
meats, "  (page  28  of  the  Report),  which  the  Commission 
claims  existed  during  the  days  of  the  National  Packing 
Co.,  and  the  Trade  Commission  refers  to  the  National 
Packing  Co.  as  a  "  subterfuge ' '  for  covering  up  the  pur- 
poses of  the  '  *  pools  "  that  existed  before  1902. 

We  are  then  informed  that  a  device  had  been  contrived 
for  suppressing  competition  among  the  large  companies 
whereby  the  receipts  of  live  stock  at  the  various  markets 
were  divided  among  the  several  packers.  The  Trade 
Commission  tries  to  link  up  the  1 1  effected  control  of  ship- 
.ments  and  prices  of  fresh  meats ' '  with  this  new  device  in 
order  to  make  out  that  collusive  action  was  continuous 
through  the  days  of  the  National  Packing  Company  and 
since  its  dissolution.  The  transition  from  the  one  method 
to  the  other  is  indeed  vague;  it  is  only  by  unwarranted 
assumption  and  by  positive  statement  not  based  on  fact 
that  the  Trade  Commission  effects  this  link  in  its  chain 
of  reasoning. 

Pages      Evidence  is  introduced  to  prove  that  there  was  an 

29  and  ao  agreed  division  of  live-stock  receipts  prior  to  1912.    This 

evidence  consists  of  statements  that  a  former  head  hog 


18 

buyer  and  a  ' '  buyer  employed  at  Kansas  City ' '  had  told 
the  Commission  that  there  had  been  agreements  to  divide 
receipts  according  to  fixed  percentages.  This  evidence 
can  hardly  be  considered  authoritative  since  the  names 
of  the  informants  are  not  given,  since  they  may  have  had 
some  special  reason  for  wanting  to  testify  against  the 
large  packers,  and  since,  if  they  had  been  telling  what 
they  then  thought  was  the  truth,  they  might  even  have 
been  mistaken  in  their  conviction  as  to  whether  there 
really  was  an  agreed  division.  The  last  explanation  is 
probably  the  correct  one,  because  a  buyer,  when  he  finds 
that  his  concern  is  buying  a.  fairly  definite  proportion  of 
receipts,  is  likely  to  assume  that  this  results  from  an 
agreement  with  other  packers.  That  this  is  not  the  case 
will  be  pointed  out  below. 

The  Trade  Commission  apparently  considers  that  all 
references  to  percentages  bought  at  different  markets 
found  in  letters  or  memoranda  in  the  packers  •  files  are 
proof  of  agreement.  For  this  purpose  a  letter  addressed 
to  Mr.  M.  R.  Murphy  is  quoted  at  the  bottom  of  page  29. 
Among  the  numerous  references  to  percentages  in  this 
letter  one  will  look  in  vain  for  even  a  suggestion  that 
there  was  an  agreement  among  the  packers.  In  fact,  this 
letter  indicates  absence  of  agreement,  as,  for  example, 
where  the  writer  says — "I  wired  you  today  that  I  thought 
you  ought  to  buy  17  per  cent,  of  the  hogs  at  Kansas  City, 
30  per  cent,  at  Omaha,  and  50  per  cent.,  or  just  as  many 
hogs  as  Armour  buys,  at  Sioux  City."  If  there  had  been 
any  agreed  percentage,  the  writer  would  have  naturally 
referred  to  the  agreement,  and  spoken  of  the  necessity 
of  living  up  to  it,  instead  of  merely  wiring — "I  thought 
you  ought  to  buy ' '. 

It  should  be  pointed  out  in  this  connection,  as  will  be 
explained  below,  that  each  packer  keeps  a  careful  record 


of  the  percentage  that  he  buys  in  each  market,  and  that 
he  aims  to  at  least  maintain  this  percentage.  Such  a  per- 
centage becomes  a  usual  or  customary  gauge  of  his  suc- 
cess in  developing  his  business,  and  he  therefore  fre- 
quently has  occasion  to  refer  to  the  percentage  of  animals 
that  he  buys,  and  to  give  instructions  to  buyers  in  ac- 
cordance with  such  customary  percentages.  The  point  is 
that  references  to  percentages  do  not  in  themselves  imply 
any  agreement  or  collusion  whatsoever  with  other  pack- 
ers. 

Pages  Another  supposed  evidence  of  agreement  previous  to 
31,32,  IQH  was  found  in  a  letter  to  Mr.  Veeder  from  Paul  D. 
33,34.  Cravath  (page  31  of  Report).  Attached  to  this  was  a 
memorandum,  reproduced  on  pages  31,  32,  33,  and  34  of 
the  Report,  showing  the  number  and  percentages  of  ani- 
mals bought  by  different  packers  in  different  markets. 
There  is  not  a  single  word  that  indicates  that  these  per- 
centages were  the  result  of  agreement ;  the  memorandum 
was  made  up  by  Mr.  Cravath 's  client,  the  Schwartzchild 
and  Sulzberger  Company,  as  explained  in  the  letter  itself, 
and  covered  past  occurrences.  The  very  fact  that  Mr. 
Cravath  asked  Mr.  Veeder  to  check  up  the  figures  is 
pretty  good  evidence  that  they  had  not  been  the  result  of 
collusion  among  the  packers. 

The  truth  of  this  matter  is  that  Mr.  Cravath  was  study- 
ing the  situation  at  that  time  with  a  view  to  trying  to  get 
the  other  packers  to  agree  to  some  legal  arrangement  that 
would  lead  to  more  satisfactory  conditions.  Competitive 
profits  at  that  time  were  unreasonably  low,  and  the  Sulz- 
berger company  was  already  suffering  from  the  aggres- 
siveness of  the  other  packers.  Swift  &  Company,  al- 
though believing  that  some  such  arrangement  might  be 
technically  legal, — especially  as  the  "Veeder  Pool"  had 
been  specifically  permitted  by  the  injunction  issued  in 


20 

1902, — preferred  not  to  run  any  risk  of  criticism,  and 
definitely  declined  to  enter  into  any  such  arrangement  as 
was  suggested. 

And  yet  the  Trade  Commission  introduces  this  letter  as 
evidence  that  there  was  an  agreement  in  1911 !  The  Com- 
mission could  have  easily  ascertained  the  facts  if  it  had 
desired  to  go  into  both  sides  of  this  question. 
Pages  rpftg  federal  Trade  Commission  tries  to  show  that  the 
34  and  35  alleged  division  of  live-stock  receipts  during  the  days  of 
the  National  Packing  Co.  was  continued  after  the  dissolu- 
tion by  introducing  a  table  of  percentages  of  purchases 
by  the  five  large  packers  and  the  National  Packing  Co. 
(page  35  of  the  Report)  from  1910  to  1913,  found  in  the 
office  of  Swift  &  Company.  There  is  absolutely  no 
evidence  that  the  percentages  were  the  result  of 
an  agreement  among  the  packers;  such  is  merely 
assumed  by  the  Trade  Commission.  The  feature  of  this 
table  to  which  the  Trade  Commission  calls  attention  is 
the  last  column  headed  "1910 — arbitrary."  This  column 
shows  the  percentage  purchased  by  each  of  the  five  large 
packers,  after  making  readjustments  caused  by  the  dis- 
solution of  the  National  Packing  Co.  in  1912.  The  infer- 
ence is  that  new  percentages  were  arranged  by  agreement, 
and  that  this  table  shows  the  continuance  of  an  arrange- 
ment from  1910  to  1913. 

The  fact  is  that  Swift  &  Company  has  always  been  in 
the  habit  of  compiling  these  percentages  for  its  own  use, 
so  as  to  measure  its  success  in  holding  its  own  and  in 
gaining  on  competitors.  During  the  year  1913,  it  was 
practically  impossible  to  make  comparisons  with  previous 
years  because  the  National  Packing  Co.,  whose  business 
was  divided  among  Swift,  Armour,  and  Morris,  had  been 
in  existence  and  taking  part  of  the  receipts,  previous  to 


21 

and  including  part  of  1912.  It  was  therefore  necessary  to 
recompile  the  figures  for  such  a  year  as  1910  by  eliminat- 
ing the  percentage  bought  by  the  National  Packing  Co., 
and  spreading  this  percentage  over  the  percentages  taken 
by  the  other  five  companies.  That  is  to  say,  the  column 
headed  "1910 — arbitrary"  was  merely  a  device  employed 
by  Swift  &  Company  to  compare  its  percentage  of  1913 
with  ifs  percentage  of  1910 ;  such  a  percentage  is  of  course 
no  evidence  of  any  continuing  agreement,  or  of  any  col- 
lusive readjustment  of  percentages,  even  though  the  read- 
justed figures  for  1910  were  apparently  obtained  and  used 
by  other  packers  in  making  their  comparisons. 
Pages  ^  further  attempt  is  made  to  show  that  there  was  an 
36  and  37  agreement  to  adjust  percentages  after  the  dissolution  of 
the  National  Packing  Co.  by  introducing  part  of  a  memo- 
randum by  Mr.  G.  F.  Sulzberger,  found  in  what  the  Fed- 
eral Trade  Commission  sensationally  calls  "The  Black 
Book. "  There  is  nothing  in  this  letter  except  an  indica- 
tion that  Mr.  Sulzberger  and  Mr.  Armour  had  compared 
notes  as  to  the  percentages  of  live  stock  that  they  and 
other  packers  had  been  purchasing.  The  table  of  per- 
centages which  accompanied  this  letter  (page.  37  of  the 
Report)  is  a  memorandum  of  past  purchases.  There 
is  nothing  at  all  about  this  letter  or  the  percent- 
ages to  indicate  that  there  was  any  agreement  as 
to  what  the  percentages  should  be  in  the  future. 
It  is  difficult  to  see  how  such  informal  interchange  of  in- 
formation can  be  interpreted  as  evidence  of  a  definite 
agreement  among  the  large  packers  to  divide  receipts, 
especially  when  it  is  known  that  at  that  time  the  Sulz- 
berger Co.  was  beginning  to  have  financial  difficulties  and 
that  Mr.  Sulzberger  had  had  frequent  informal  confer- 
ences with  Mr.  Armour  and  representatives  of  other 
packers,  complaining  of  their  severe  competition. 


22 

Pages      Neither  is  there  anything  in  the  letters  addressed  to 

38  and  39  Mr .  M.  R.  Murphy  which  indicates  that  there  was  any 

agreement.  In 'fact,  the  first  letter  to  Mr.  "Murphy  gives 
vary  clear  evidence  of  competition  where  it  says — "the 
trouble  is  that  there  ought  to  be  105  per  cent,  to  satisfy 
everybody, "  and  again — "I  don't  want  to  be  too  aggres- 
sive on  the  market,  but  at  the  same  time  we  cannot  afford 
to  slide  back." 

In  concluding  our  discussion  of  the  attempt  of  the 
Trade  Commission  to  prove  a  continuing  arrangement 
from  the  time  of  the  old  beef  pools  during  the  nineties, 
through  the  days  of  the  National  Packing  Company,  and 
up  to  the  present  time,  it  requires  but  little  analysis  to 
show  that  no  continuing  arrangement  could  have  existed. 
The  beef  pools  were  arrangements  to  allocate  shipments 
of  dressed  beef  to  the  various  eastern  markets ;  the  Na- 
tional Packing  Company  was  a  corporation  in  which  tne 
three  largest  packers  owned  stock  in  proportion  to  the 
tangible  assets  of  tjie  three  large  packing  companies ;  the 
alleged  agreement  of  today  is  one  of  divided  receipts  of 
live  stock !  Any  one  arrangement  could  not  have  been  a 
continuation  of  the  preceding  one. 

And  in  addition  to  this,  the  Veeder  pool  of  the  early 
period  was  never  declared  illegal,  and  its  principle  was 
specifically  permitted  by  the  injunction  of  1902 ;  and  the 
federal  courts  decided  that  the  National  Packing  Com- 
pany was  not  in  illegal  restraint  of  trade,  and  the  ques- 
tion of  agreed  division  of  receipts  was  involved  in  that 
case!  So  much  for  the  Trade  Commission's  use  of  early 
history  in  its  attempt  to  prove  that  there  is  an  agreed 
division  of  live-stock  receipts  today. 
Pages  jn  bringing  the  discussion  of  the  alleged  agreement  to 

39  to  41    divide  live-stock  receipts  up  to  the  present   time,  the 


23 

Federal  Trade  Commission  begins  by  pointing  out  the 
proportions  of  total  receipts  which  the  large  packers  are 
said  to  buy  in  this  manner,  and  then  goes  on  to  explain 
the  "centralized  buying  system,"  through  which  buying 
policies  are  carried  out. 

Centralized  Buying  System. 

Pages  ^he  Trade  Commission  describes  the  buying  system 
42  to  44  USed  by  the  large  packers,  whereby  their  purchases  in 
various  markets  are  governed  by  their  respective  head 
buying  offices  in  Chicago.  It  is  explained  that  these  head 
buyers  are  in  constant  telegraphic  communication  with 
the  buyers  in  the  different  markets,  and  that  they  issue 
specific  instructions  which  have  to  be  carried  out  by  their 
sub-buyers. 

The  description  of  this  centralized  buying  system  is  a 
good  example  of  the  Trade  Commission's  practice  in  de- 
scribing a  perfectly  legitimate  proceeding  in  such  a  way 
as  to  insinuate  that  there  is  something  irregular  about  it. 
For  example,  the  Trade  Commission  says: 

Page  42  "All  (the  buyers  who  were  questioned)  said  that  they  were  cora- 

( Italics  pelled  to  make  their  purchases  in  line  with  instructions  from  Chi- 

Inserted  cago.     *     *     *       Buying  instructions  must  be  obeyed,   all  agreed, 

by  S.  &  Co.)  The  head  buyers  at  Chicago  admitted  this." 

Why  should  the  Trade  Commission  say  that  the  head 
buyers  "admitted"  this?  There  is  no  secret  about  it, 
and  it  is  nothing  to  be  ashamed  of.  This  is  merely  an 
example  of  the  insinuating  methods  used  by  the  Com- 
mission. 

Page  44  rp^g  Commission  closes  its  discussion  of  this  matter  by 
saying  that:  "This  constitutes  a  situation  in  which  a 
control  of  the  buying  policies  of  all  the  large  packers 
may  be  effectuated,  and  only  a  few  men  in  each  company 
need  know  that  there  is  an  agreement  or  understanding. ' ' 


24 

Although,  the  Commission  refers  to  "an  agreement "  as 
though  it  had  established  its  case,  there  is  not  even  a 
charge  of  collusion  between  the  different  packers  in 
connection  with  this  description  of.  centralized  buying. 
The  Commission  apparently  introduces  this  discussion 
in  order  to  show  that  it  would  be  easier  for  the  packers 
to  get  together  because  they  have  these  centralized  buy- 
ing systems  than  it  would  be  if  they  did  not  have  them. 

The  impression  is  also  created  that  the  packers  are  able 
to  exercise  some  control  over  prices  in  different  markets 
through  this  centralized  buying  system.  This  same  mat- 
ter is  dealt  with  on  pages  96  and  97  of  the  Report,  where 
telegrams  are  reproduced  to  indicate  that  the  large  pack- 
ers "make"  the  market  through  their  instructions  to 
buyers.  Even  if  Swift  &  Company's  head  buyer  in  Chi- 
cago wired  to  the  buyer  in  Omaha  to  buy  "ten  lower  than 
yesterday, " — this  means  to  buy  lower  if  he  can.  It  im- 
plies no  control  over  prices  whatsoever.  A  good  exam- 
ple of  the  kind  of  instructions  issued  is  found  on  page 
97  of  the  Report,  where  Mr.  G.  F.  Swift,  Jr.,  wires  to 
Kansas  City,  South  Omaha,  and  St.  Louis : 

"Try  buy  hogs  lower  and  improve  spread.  We  are  trying  buy 
15/25  lower  K.  C.  buy  around  2000  So  Om  buy  around  2000  St. 
Louis  buy  around  2000." 

This  is,  of  course,  a  perfectly  legitimate  way  of  instruct- 
ing buyers,  and  is  one  that  we  shall  undoubtedly  continue. 
It  is  only  through  unfair  insinuation  that  telegrams  like 
the  above  can  be  construed  as  indicating  questionable 
practices. 

There  is,  of  course,  absolutely  no  collusion  with  other 
packers  in  this  matter  of  sending  out  instructions  to 
buyers. 

The  important  point  is  that  this  whole  subject  of  the 
centralized  "buying  system  has  been  written  up  by  the 


25 

Federal  Trade  Commission  in  such  a  way  as  to  throw 
suspicion  on  a  perfectly  legitimate  and  praiseworthy 
method  that  each  packer  employs  in  centralizing  and 
controlling  his  buying  operations. 

Evidence  from  Packer  Buyers. 

Page  44  jn  connection  with  the  alleged  division  of  live-stock 
receipts,  it  is  of  extreme  significance  that  in  all  its 
efforts  to  prove  a  case  against  the  packers  the  Federal 
Trade  Commission  has  been  unable  to  unearth  one  single 
bit  of  positive  proof  that  such  an,  agreement  exists.  No 
such  agreement  could  be  carried  out  without  a  great 
many  people  having  to  know  about  it.  The  Trade  Com- 
mission makes  the  point  that  "one  of  the  buyers  at  a 
western  market"  stated  that  he  "couldn't  prove  it  but 
it  did  look  awfully  much  as  though  the  packers  got  to- 
gether and  divided  up  the  total  receipts  for  the  day.7' 
This  is  pretty  slim  sort  of  evidence  for  the  Federal 
Trade  Commission  to  even  introduce  into  its  report. 

. 

Packer  Exchange  of  Information. 

page  45  ^he  Federal  Trade  Commission  says  that  the  packers 
keep  "a  complete  record  of  all  one  another's  live-stock 
purchases  and  shipments"  and  insinuates  that  this  prac- 
tice has  ; '  a  direct  bearing  on  their  combination  in  divid- 
ing live-stock  receipts." 

As  a  matter  of  fact,  each  packer  keeps  a  record  of  the 
purchases  of  other  packers  for  competitive  reasons; 
Swift  &  Company,  for  example,  in  order  to  measure  its 
success  in  holding  its  own  in  the  different  markets, 
keeps  these  records  for  its  own  use ;  it  has  done  this  for 
years  and  expects  to  continue  to  do  so.  There  is  nothing 


26 

in  this  fact  to  indicate  that  there  is  an  agreement  with 
the  other  packers. 

As  for  the  collection  of  market  information,  the  Fed- 
eral Trade  Commission  has  put  this  matter  in  an  entirely 
wrong  light.  The  packers  need  the  most  detailed  and 
accurate  information  possible  concerning  receipts  of  an- 
imals at  the  various  markets^  the  number  shipped  on  to 
other  markets,  e,tc.,  in  order  to  govern  their  buying  as 
accurately  as  possible;  and  they  need  this  information 
each  day  as  early  in  the  moniing  as  possible.  In  many 
markets  the  machinery  for  gathering  such  information 
is  inadequate,  and  the  packers  themselves  have  co-op- 
erated in  establishing  methods  to  obtain -it. 

Page  46  This  accounts  for  the  situation  at  Kansas  City,  de- 
scribed at  the  top  of  page  46  of  the  Report,  where  it  is 
said  that  the  large  packers  "jointly  employ  two  men 
to  gather  market  information/'  The  information  ob- 
tained in  this  way  is  not  used  by  Swift  &  Company  in 
any  illegitimate  way.  It  is  not  used  as  a  basis  for  "wir- 
ing on,"  as  alleged  by  the  Trade  Commission,  although 
even  this  practice  is  not  an  illegitimate  one,  as  will  be 
shown  on  pages  52  to  57  below. 

It  might  be  mentioned,  in  this  connection,  that  the  Fed- 
eral Government,  through  its  Bureau  of  Markets,  has 
been  developing  an  organization  for  the  collection  and 
dissemination  of  market  information;  Swift  &  Company 
at  least  would  be  glad  to  see  this  work  extended  to  such 
a  point  that  the  packers  may  be  relieved  of  all  expense 
and  trouble  in  performing  this  function. 


27 


Approximate  Uniformity  of  Purchase  Percentages. 
The  Real  Explanation. 

Pages  Although  the  Federal  Trade  Commission  uses  every 
46  to  78  possible  means  to  make  it  appear  that  there  is  a  uni- 
formity of  percentages  in  the  purchase  of  live  stock, 
due  to  agreements  among  the  packers,  the  truth  of  the 
matter  is  that  such  uniformity  as  exists  is  an  indication 
of  active  competition  and  of  the  close  watch  that  each 
packer  keeps  on  the  others.  As  already  explained,  each 
packer  keeps  a  record  from  week  to  week  of  the  per- 
centages of  total  receipts  at  the  various  markets  pur- 
chased by  himself  and  by  each  of  the  other  packers. 
Swift  &  Company  is  jealous  of  its  position  and  does 
not  intend  to  let  the  other  packers  gain  in  their  propor- 
tion of  the  total  by  so  much  as  a  fraction  of  one  per 
cent. 

It  is  true  that  the  competition  in  purclrasing  does  not 
take  the  form  of  "cut-throat"  competition,  except  per- 
haps to  a  slight  extent  at  certain  times.  Any  packer 
might  be  able  to  increase  his  proportion  inordinately  by 
going  out  and  "bidding  up"  the  market;  or,  in  other 
words,  by  paying  more  than  the  animals  are  worth  in  the 
form  of  dressed  meat.  Any  packer  who  tried  this  would 
of  course  lose  money,  and  the  chances  are  that  even  if 
this  were  tried  the  other  packers  would  follow  suit  in 
order  to  maintain  their  positions  in  the  market.  Each 
packer  not  only  has  a  fairly  definite  killing  capacity  in 
his  plants,  but  he  has  a  certain  established  trade  which 
he  must  take  care  of,  and  if  he  falls  off  in  his  killing  as 
compared  with  one  or  more  of  the  other  packers,  he  will 
lose  customers  for  meat  and  perhaps  suffer  a  permanent 
falling  off  in  his  total  business.  This  would  also  result 
in  running  up  his  overhead  expense,  while  his  compet- 


28 

itors'  expenses  would  be  kept  down  by  their  greater  vol- 
ume. It  has  been  learned  through  experience  by  the 
large  packers  that  it  does  not  pay  for  any  one  of  them 
to  bid  up  the  market  by  even  a  few  cents  a  hundred 
pounds  over  what  the  animals  are  actually  worth  in  the 
form  of  meat,  and  consequently  price  competition  and 
buying  competition  are  carried  on  within  fairly  narrow 
limits.  The  packers '  buyers  are  expert  judges  of  weights, 
dressing  percentages,  and  the  qualities  of  meat  derived 
from  various  animals,  and  their  competitive  bids  in  the 
live-stock  markets  ordinarily  vary  only  from  10  to  15 
cents,  or  perhaps  25  cents  per  hundred  pounds,  and  each 
buyer  naturally  tries  to  buy  at  such  a  price  as  will  yield 
a  profit  to  the  company  on  each  purchase. 

If  there  is  anything  wrong  in  the  lack  of  cut-throat  or 
destructive  competition  that  would  result  from  a  reckless 
attempt  to  increase  purchase  percentages  by  bidding  up 
the  market  inordinately,  the  packers  are  guilty.  We  do 
not  believe,  however,  that  we  can  rightfully  be  criticised 
for  not  entering  into  such  competition,  which  would  not 
only  be  disastrous  to  ourselves  or  any  other  packer  who 
attempted  it,  but  which  would  be  of  no  benefit  to  any  one. 
It  would  only  tend  to  make  the  market  more  erratic,  and 
it  would  unsettle  conditions  generally.  It  is  usually 
conceded  that  cut-throat  competition  is  unhealthful  and 
there  have  been  developed  in  many  industries  forms  of 
co-operative  competition  to  regulate  this  very  thing. 
The  form  that  this  has  commonly  taken  in  recent  years 
is  the  open-price  association,  whereby  a  group  of  manu- 
facturers in  a  certain  industry,  or  a  group  of  jobbers  in 
a  certain  trade,  report  individually  to  a  central  bureau 
their  costs,  sales,  prices,  etc.,  of  the  previous  week  or 
month.  Statistics  are  then  compiled  and  given  to  the 
various  members;  these  are  records  of  past  transac- 


29 

tions  and  form  the  basis  of  future  operations,  without 
any  agreement  as  to  what  prices  shall  be. 

There  is  not  even  this  kind  of  an  agreement  in  the 
packing  industry;  in  fact,  there  is  no  agreement  what- 
ever as  to  the  division  of  receipts,  and  a  careful  reading 
of  the  Trade  Commission's  report  shows  that  there  is 
really  no  evidence  of  such  an  agreement.  The  fact  is 
that  each  packer  watches  the  others  so  closely  that  no 
one  of  them  is  able  to  gain  appreciably  on  the  others, 
and  consequently  the  proportion  of  animals  bought  by 
each  remains  fairly  constant  from  year  to  year.  There 
is  no  occasion  for  surprise  that  this  is  true.  If  statistics 
were  available  to  show  the  sales  of  the  half  dozen  leading 
wholesale  grocers  or  department  stores  in  Chicago,  we  do 
not  doubt  but  that  the  percentage  of  the  total  done  by  each 
would  remain  fairly  constant  from  year  to  year.  The 
more  competitors  come  in  direct  contact  with  each  other, 
and  the  more  they  are  able  to  watch  each  other  closely, 
the  more  nearly  uniform  will  be  the  percentage  of  busi- 
ness done  by  each.  And  the  purchase  of  live  stock  is 
carried  on  in  open  organized  market  places  where  each 
packer  can  watch  the  other  with  the  closest  scrutiny,  and 
hence  it  is  only  natural  that  it  would  be  even  more  diffi- 
cult for  one  packer  to  gain  on  the  others  in  this  trado 
than  in  almost  any  other  trade. 

With  these  thoughts  in  mind,  it  is  much  easier  to  un- 
derstand and  to  appraise  the  allegations  of  the  Commis- 
sion. Even  a  slight  change  in  purchase  percentages  is 
really  significant.  The  Trade  Commission's  own  figures, 
on  page  57  of  the  Report,  show  that  Swift  &  Company's 
percentage  of  cattle  purchases  increased  1.17  per  cent, 
from  1913  to  1917.  This  means  that  Swift  &  Company 
killed  about  90,000  more  cattle  in  1917  than  if  it  had  not 
increased  its  percentage  over  1913.  This  also  means  that 


30 

Swift  &  Company  increased  its  proportion  of  total  pur 
chases  of  cattle  by  nearly  3^  per  cent,  in  four  years. 
The  figures  for  1918  show  a  still  further  increase  in  their 
percentage  of  purchases  for  Swift  &  Company,  and  this 
is  a  highly  satisfactory  situation,  because  it  shows  that 
at  least  in  the  buying  of  cattle  and  in  the  selling  of 
cattle  products,  we  have  made  a  gradual  and  substantial 
gain  on  our  competitors  in  the  past  five  years. 

Contrast  this  explanation  with  the  statement  of  the 
Federal  Trade  Commission  at  the  top  of  page  48  of  the 
Report,  where  it  is  said  that  the  weekly  figures  kept 
by  each  of  the  large  packers  for  comparison  of  purchases 
made  by  other  packers  "does  not  supply  useful  business 
information,  but  shows  how  nearly  the  agreement  is 
being  adhered  to."  This  is  merely  an  attempt  to  give 
the  impression  that  the  fairly  constant  percentages  result 
from  a  formal  agreement,  without  giving  any  considera- 
tion to  the  actual  economic  facts  underlying  this  phe- 
nomenon. 

What  has  been  said  of  the  reason  why  percentages  of 
purchases  remain  fairly  constant  from  year  to  year  ap- 
plies only  to  markets  that  are  fairly  well  developed  and 
where  conditions  are  fairly  stable.  The  Trade  Com- 
mission introduces  a  number  of  tables  and  diagrams, 
from  pages  48  to  75  of  the  Report,  which  show  how  these 
percentages  work  out.  It  will  be  shown  below,  however, 
that  for  certain  markets  figures  have  been  omitted  which 
show  that  in  important  cases  they  have  not  been  so  uni- 
form after  all.  This  point  is  especially  important  in 
connection  with  the  situations  at  Denver  and  St.  Paul, 
where  the  actual  figures  quite  disprove  statements  made 
by  the  Federal  Trade  Commission.  (See  pages  38  and 
35,  respectively,  below.) 


31 

Page  57  flie  Sulzberger  memoranda,  quoted  on  pages  57,  58,  and 
59  of  the  Report,  contain  absolutely  no  evidence  of  agree- 
ments to  divide  live-stock  purchases.  They  merely  show 
an  occasional  interchange  of  information,  concerning  past 
transactions,  between  Mr.  Sulzberger  and  other  individ- 
ual packers.  Some  of  these  memoranda  have  to  do  with 
foreign  shipments  and  have  no  bearing  on  the  point  at 
issue.  The  Trade  Commission  loses  no  opportunity  to 
try  to  drive  home  the  impression  that  the  percentages 
quoted  in  these  memoranda  must  have  been  the  result  of 
agreement,  and  that  they  serve  as  bases  for  agreements 
for  future  operations. 

The  Situation  at  St.  Joseph. 

Pages  prom  pages  gQ  to  65  of  the  Report  the  Trade  Corn- 
so  to  65  mission  introduces  telegrams  with  regard  to  the  situa- 
tion at  St.  Joseph,  to  indicate  that  representatives  of 
Swift  &  Company  were  worried  over  the  fact  that  Ar- 
mour and  Morris  were  not  buying  their  "share"  of  the 
cattle  in  that  market,  and  that  Swift  &  Company  had 
tried  to  get  these  two  competitors  to  buy  more  animals. 
These  telegrams  are  introduced  as  evidence  that  they 
must  have  been  in  agreement  as  to  the  percentage  that 
each  should  buy,  and  the  Federal  Trade  Commission  tries 
to  give  the  impression  that  these  agreed  percentages 
were  an  obligation  that  each  packer  must  buy  his  full 
share  when  the  receipts  are  heavy. 

The  truth  of  the  matter  is  that  occasionally  the  St. 
Joseph  market  tends  to  get  "out  of  line"  and  slightly 
under  the  Kansas  City  market,  near  which  St.  Joseph  is 
located.  Competitive  conditions,  resulting  from  the 
efforts  of  each  packer  to  buy  in  the  lowest  market,  always 
cure  such  a  situation  and  automatically  distribute  ship- 


32 

merits  among  the  various  markets  so  as  to  keep  them  in 
line  with  each  other.  But  there  have  been  occasions, 
when  receipts  were  temporarily  heavy,  that  prices  in  St. 
Joseph  have  been  slightly  below  those  in  Kansas  City. 
Swift  &  Company  has  a  large  interest  in  the  stock  yards 
in  St.  Joseph,  and  has  a  well  equipped  packing  plant 
there,  and  naturally  is  anxious  that  shipments  should 
continue  to  come  to  that  market,  and  to  that  end  that 
shippers  shall  be  satisfied  with  the  prices  they  obtain 
as  compared  with  other  markets ;  otherwise  they  will  stop 
shipping  to  St.  Joseph.  Although  other  packers  have 
plants  at  St.  Joseph,  they  sometimes  rely  too  much  on 
the  "other  fellow "  to  support  a  bad  market. 

Swift  &  Company  has  always  done  its  utmost,  during 
periods  of  excessive  receipts,  to  support  the  St.  Joseph 
market,  and  has  even  urged  its  competitors  to  buy  more 
heavily  and  to  assume  a  greater  proportion  of  the  respon- 
sibility for  keeping  this  market  in  line.  Swift  &  Com- 
pany acknowledges  that  it  has  even  done  this  during  the 
past  few  months  since  the  Trade  Commission  has  alleged 
that  this  practice  constitutes  an  evidence  of  collusion. 
Swift  &  Company  can  see  no  harm  in  making  such  efforts 
to  support  a  market.  The  fact  that  we  have  urged  other 
packers  to  buy  more  does  not  in  any  way  indicate  that 
there  is  an  agreement.  When  we  have  used  the  word 
" share "  (as  in  the  letter  at  the  bottom  of  page  60  of 
the  Report),  this  does  not  mean  an  agreed  upon  per- 
centage, but  merely  the  share  or  proportion  that  each 
packer  has  been  accustomed  to  purchase  or  that  we  think 
such  packer  ought  to  purchase  in  order  to  do  his  part  in 
supporting  the  market. 

Attention  is  called  to  the  table  on  page  65  of  the  Re- 
port, which  shows  that  the  percentages  of  cattle  and  hogs 
bought  by  Swift,  Armour,  and  Morris  in  St.  Joseph  have 


33 

varied  appreciably  from  year  to  year.  The  Federal 
Trade  Commission  tries  to  make  out  that-  this  was  a 
failure  to  live  up  to  " percentages  agreed  upon";  the 
Commission's  position  is  that  uniformity  in  percentages 
shows  agreement,  and  that  a  lack  of  uniformity  shows  a 
failure  to  live  up  to  the  agreement.  In  either  case,  the 
Commission  assumes  that  an  agreement  exists,  and  then 
interprets  the  evidence  to  prove  the  assumption! 

The  St.  Paul  Situation. 

Fage  65  ^  the  bottom  of  page  65  of  the  Export  the  Trade  Com- 
mission introduces  a  statement  attributed  to  J.  T.  Mc- 
Millan, which  appears  on  its  face  to  contain  pretty  strong 
evidence  that  there  must  be  an  agreement  between  Swift 
and  Armour  in  the  division  of  live-stock  receipts  at  South 
St.  Paul.  It  is  reported  that  Mr.  Bangs,  the  manager  of 
Swift's  St.  Paul  plant,  said  to  Mr.  McMillan:  "If  you 
move  to  the  yards,  you  couldn't  do  that;  you  would  have 
to  agree  to  buy  not  over  a  stipulated  proportion  of  the 
hogs  offered  each  day,  the  same  sort  of  working  agree- 
ment we  have  with  Armour. ' ' 

It  will  be  noted  that  no  indication  is  given  as  to  when 
or  where  this  statement  was  made.  One  is  inclined  to 
believe  that  if  it  were  authentic,  authoritative,  and  con- 
clusive, the  Federal  Trade  Commission  would  have  made 
much  more  conspicuous  use  of  it  in  trying  to  establish  its 
thesis  that  percentages  are  fixed  by  agreement. 

The  only  basis  we  can  find  for  this  statement  is  in  the 
evidence  at  the  Trade  Commission's  hearings  held  in 
St.  Paul  in  January,  1918.  It  appears  that  Mr.  McMillan, 
who  has  a  plant  at  St.  Paul,  was  explaining  negotiations 
which  he  had  with  Mr.  Bangs  relative  to  -the  bringing  of 
his  (Mr.  McMillan's)  plant  from  St.  Paul  to  the  stock 


34 

yards  at  South  St.  Paul.  It  also  appeared  that  Mr.  Mc- 
Millan was  concerned  as  to  whether  he  would  be  able  to 
buy  enough  hogs  to  operate  his  proposed  plant,  and  that 
Mr.  Bangs  assured  him  that  he  would  get  an  ample  sup- 
ply. There  is  evidence  that  during  the  negotiations  there 
was  considered  a  stipulation  that  Mr.  McMillan's  pro- 
posed plant  should  be  of  a  certain  minimum  capacity. 
There  was  to  be  absolutely  no  stipulation  as  to  how  much 
larger  than  this  minimum  the  plant  might  be.  That  is 
to  say,  there  is  absolutely  no  evidence  that  Mr.  McMil- 
lan's operations  were  to  be  limited  or  curtailed  in  any 
way,  as  would  appear  from  the  quotation  at  the  bottom 
of  page  65  of  the  Report.  Evidence  in  volume  7  of  the 
transcript  of  the  hearings  before  the  Federal  Trade  Com- 
mission, pages  1356  and  1359,  bears  this  out.  This  part 
of  the  Trade  Commission's  presentation  of  the  case  must 
have  been  a  pure  figment  of  the  imagination. 

It  is  true  that  in  the  public  hearings  Mr.  McMillan  said 
that  Mr.  Bangs  told  him,  in  assuring  him  that  he  would 
be  able  to  buy  enough  hogs  that — ' '  that  would  be  arranged 
on  a  percentage  basis,  the  same  agreement  as  Armour 
had" — (page  1360  of  the  transcript).  It  is  perfectly  evi- 
dent, however,  from  other  testimony  that  was  introduced, 
and  from  the  facts  in  the  case,  that  Mr.  McMillan  could 
not  possibly  have  quoted  Mr.  Bangs  correctly,  and  that 
Mr.  Bangs  could  have  said  nothing  more  than  that  Mr. 
McMillan  would  get  "his  share,"  or  what  he  needed  to 
satisfy  his  requirements,  just  the  same  as  Armour  had 
been  able  to  buy  all  that  he  wanted.  That  this  interpre- 
tation is  not  fanciful  is  corroborated  by  the  testimony  of 
Mr.  Bangs  himself  on  pages  1308  to  1310  of  the  tran- 
script, in  which  he  denied  having  made  such  'a  statement 
to  Mr.  McMillan,  and  by  the  testimony  of  Mr.  T.  F. 
Wehner,  a  former  hog  buyer  for  Armour  at  South  St. 


35 

Paul  (pages  1331-1333  of  the  transcript),,  in  which  he 
showed  that  there  was  no  agreed  division  of  receipts 
between  Swift  and  Armour. 

Absolutely  conclusive  evidence  that  there  has  been  no 
agreement  among  the  several  packers  to  divide  receipts 
at  South  St.  Paul  is  found  in  the  following  table  of  actual 
percentages  of  cattle  and  hog  purchases  taken  by  the  five 
large  packers  at  South  St.  Paul  for  each  year  from  1914 
to  1918 : 


Percentage  of  Cattle  and  Hogs  Purchased  by  Each  of  the  Five 
Large  Packers,  South  St.  Paul,  1914  to  1918. 

CATTLE. 

Year  Total  Head  Swift      Armour      Morris     Cudahy     Wilson 

1914  168,487  97.4  1.0  0.2  0.2  1.2 

1915  241,645  92.5  5.1  0.3  1.0  1.1 

1916  286,017  85.6  9.1  1.0  0.4  3.9 

1917  408,128  80.8  14.3  2.4  ...  2.5 

1918  463,175  78.4  19.8  0.8  0.1  0.9 

HOGS. 


1914 

1,380,679 

75.7 

23.6 

0.6 

1915 

1,869.807 

73.0 

26.9 

0.1 

1916 

2,327,000 

65.0 

34.6 

0.4 

1917 

1,524,672 

69.9 

30.1 

1918 

1,766,218 

67.1 

32.9 

This  table  shows  that  the  percentages  of  cattle  and  hogs 
bought  by  the  different  packers  vary  substantially  from 
year  to  year,  and  that  as  the  live-stock  receipts  have  been 
increasing  Swift  &  Company's  percentage  has  been  de- 
creasing, while  Armour's  has  been  increasing.  The  per- 
centages taken  by  the  other  three  packers  are  insignifi- 
cant but  indicate  that  such  purchases  as  they  make  vary 
appreciably  from  year  to  year. 

The  reason  why  the  percentages  in  this  market  have 
not  reached  a  greater  degree  of  uniformity  is  that  the 
market  is  a  new  and  growing  one  and  that  Swift  &  Com- 


•     36 

pany  is  the  only  large  packer  that  has  a  plant  in  South 
St.  Paul.  The  other  packers  have  bought  only  in  ac- 
cordance with  the  requirements  of  their  plants  at  other 
points.  When  Armour's  plant  (now  being  built)  gets  to 
operating,  the  proportions  taken  by  Swift  and  Armour 
will  undoubtedly  settle  down  to  fairly  constant  per- 
centages, just  as  they  have  in  other  markets. 

At  any  rate  the  figures  shown  are  positive  evidence 
that  receipts  at  South  St.  Paul  have  not  been  divided 
by  agreement  between  Armour  and  Swift,  although  the 
Federal  Trade  Commission  tries  to  give  the  impression 
that  such  a  division  of  receipts  obtains.  This  is  a  good 
example  of  the  Trade  Commission's  method  of  pre- 
senting one  little  unsubstantiated  statement  in 
order  to  prove  its  case  and  at  the  same  time  leav- 
ing out  a  -wealth  of  evidence  which  clearly  breaks 
down  its  own  contention. 

The   Situation  at  Omaha  and  Sioux   City. 

Pages  The  correspondence  introduced  by  the  Federal  Trade 
66  to  72  Commission  with  regard  to  the  situation  at  Omaha  and 
Sioux  City  does  not  directly  concern  Swift  &  Company 
and  therefore  will  not  be  discussed  in  detail.  It  is  suffi- 
cient to  point  out  one  or  two  facts  in  connection  with 
this  correspondence. 

There  are  numerous  phrases  in  these  letters  which 
show  competition;  the  references  to  "our  30  per  cent.'' 
and  the  instructions  to  buy  certain  percentages  merely 
indicate  what  the  Cudahy  company  was  accustomed  to 
purchase  and  was  trying  to  maintain.  There  is  abso- 
lutely no  evidence  of  collusion  with  other  packers,  or  that 
these  percentages  were  the  results  of  agreements. 

Attention  is  called  to  the  list  of  percentages  at  the 


37 

end  of  the  letter  on  page  68  of  the  Report,  which  were 
introduced  as  though  they  were  a  part  of  the  letter.  A 
footnote  explains  that  these  percentages  were  written 
on  the  letter  by  an  examiner  of  the  Trade  Commission. 
When  this  letter  was  reproduced  by  the  Trade  Commis- 
sion in  its  Summary  of  the  Report  on  the  Meat  Packing 
Industry,  page  29,  these  percentages  appeared  to  be  a 
part  of  the  original  letter,  and  no  explanation  was  offered 
that  they  had  been  added  by  an  examiner  of  the  Trade 
Commission.  The  explanation  in  the  footnote  on  page 
68  of  Part  II  of  the  Report  does  not  admit  the  unfair  use 
made  of  them  in  the  earlier  report  of  the  Commission. 

The    Situations    at    Oklahoma    City,    Fort    Worth, 

and  Denver. 

Pages  Only  two  large  packers  are  represented  in  each  of  these 
72  to  76  three  markets,  and  therefore  the  tendency  is  for  each  to 
buy  approximately  the  same  number  of  animals  as  does 
the  other.  For  this  reason  the  Trade  Commission  refers 
to  them  as  "50-50"  markets.  Swift  &  Company  is  not 
interested  at  Oklahoma  City,  and  the  situation  in  that 
market  will  not  be  discussed  here. 

At  Fort  Worth,  Swift  and  Armour  each  buys  about 
50  per  cent,  of  the  receipts  purchased  by  these  two  pack- 
ers. Each  plant  is  of  about  the  same  capacity,  and  so 
far  as  Swift  &  Company  is  concerned — we  do  not  intend 
to  purchase  less  than  50  per  cent,  if  we  can  possibly  help 
it.  Armour  &  Company  undoubtedly  feels  the  same  way. 
For  this  reason,  it  works  out  that  each  gets  approx- 
imately 50  per  cent. ;  and  yet  the  percentage  often  varies 
substantially,  as  for  example,  the  drop  of  Swift  &  Com- 
pany's proportion  of  cattle  purchases  from  52.06  per 
cent,  in  1914  to  49.86  per  cent,  in  1915,  according  to  the 


38 

table  on  page  75  of  the  Federal  Trade  Commission's 
report. 

The  situation  at  Denver  is  considered  of  extreme  im- 
portance by  the  Federal  Trade  Commission,  and  much  is 
made  of  the  fact  that  P.  D.  Armour  wrote  a  letter  to 
J.  Ogden  Armour,  reproduced  on  page  76  of  the  Re- 
port, in  which  he  says :  "Of  course,  as  you  know,  every- 
thing here  is  done  on  a  50-50  basis,  and  with  the  facilities 
we  have  it  is  almost  impossible  to  keep  up  this  ratio." 
The  Trade  Commission  implies  that  the  reference  to  a 
"50-50"  basis  means  an  agreed  division;  whereas,  it 
merely  means  that  each  plant  aims  to  buy  at  least  50  per 
cent,  of  the  receipts  at  that  market,  and  that  neither 
wishes  to  see  the  other  packer  become  the  larger  factor. 

In  this  connection,  the  Trade  Commission  reproduces 
on  page  75  of  the  Report  a  table  showing  the  percentages 
of  hog  purchases  taken  by  Swift  and  Armour,  and  these 
figures  indicate  that  each  takes  about  50  per  cent.,  al- 
though they  show  that  in  1915  Swift  bought  12,000  more 
hogs  than  did  Armour.  It  is  very  significant,  however, 
that  the  Trade  Commission  reproduces  only  the  percent- 
ages of  hog  purchases.  It  failed  to  reproduce  figures  of 
cattle  purchases,  which  show  marked  variations  from 
year  to  year.  Swift's  percentage  of  cattle  purchases 
was  47.6  per  cent,  in  1914;  it  increased  to  48.5  per  cent, 
in  1915 ;  to  50.7  per  cent,  in  1916 ;  and  to  54.7  per  cent,  in 
1917. 

By  increasing  from  47.6  per  cent,  to  54.7  per  cent,  (or 
7.1  per  cent,  in  all),  Swift  &  Company  increased  its  pro- 
portion by  15  per  cent,  in  three  years!  Armour's  pro- 
portion had  b?en  suffering  a  corresponding  decline,  and 
this  is  undoubtedly  what  Mr.  P.  D.  Armour  referred  to 
when  he  said,  "With  the  facilities  we  have  it  is  almost 


39 

impossible  to  keep  up  this  ratio."  Percentages  of  sheep 
purchases  show  an  even  greater  variation  from  rear  to 
year. 

The  introduction  of  the  percentages  on  cattle 
purchases  would  have  destroyed  the  desired  effect 
of  the  "50-5O"  letter  on  page  76.  This  is  another 
example  of  actual  suppression  of  information  on 
the  part  of  the  Federal  Trade  Commission. 

Conclusion  on  Alleged  Live-Stock  Pool. 

pages  jn  conclusion  the  Trade  Commission  says  that  the 
77  and  78  alleged  division  of  live-stock  receipts  gives  the  packers 
•control  over  prices,  and  says  that  especially  in  "  50-50" 
markets  the  price  offered  by  the  lower  bidder  becomes 
the  market  price,  and  hence  tends  to  reduce  the  market 
price  in  the  long  run  to  the  lowest  point  that  will  keep 
producers  raising  live  stock  and  sending  them  to  market. 
It  is  also  said  that  this  gives  a  power  over  the  prices  of 
fresh  meats,  and  that,  hence,  this  alleged  division  of 
receipts  accomplishes  the  same  purpose  as  the  Veeder 
pool  prior  to  1902. 

The  truth  is  that  even  if  there  were  an  agreed  division 
of  receipts  this  would  not  give  control  over  prices.  If 
the  price  in  Denver,  for  example,  were  artificially  re- 
duced the  least  bit  below  prices  based  on  country-wide, 
or  even  the  world-wide,  conditions,  there  would  be  ship- 
pers, speculators,  and  outside  packers  who  are  constantly 
seeking  the  lowest  markets,  and  who  would  immediately 
jump  in  and  make  purchases  of  live  stock,  either  to  hold 
them  until  the  price  recovered,  or  to  ship  them  to  other 
markets  or  to  their  plants  at  other  places.  All  stock 
yards  are  open  to  every  one  who  wishes  to  purchase,  but 
even  if  there  were  some  way  of  keeping  other  buyers  out, 


40 

the  price  could  not  be  depressed  in  such  a  market  as 
Denver,  or  any  other  market  for  that  matter,  because 
within  a  few  days  no  more  live  stock  would  be  shipped 
to  that  market. 

Again,  even  if  there  were  an  agreed  division  of  live- 
stock receipts,  this  would  give  no  control  over  meat  prices 
and  would  in  no  way  accomplish  the  purposes  of  the  old 
Veeder  pools.  As  explained  above,  the  Veeder  pools 
were  arrangements  by  which  the  total  amount  of  fresh 
beef  to  be  shipped  to  the  different  Eastern  markets  was 
determined  from  week  to  week,  and  which  was  to  be 
divided  among  the  various  packers.  This  was  for  the 
purpose  of  avoiding  gluts  and  scarcities  in  the  marketing 
of  this  highly  perishable  product.  An  agreed  division  of 
live-stock  purchases,  even  if  such  an  agreement  existed, 
would  in  no  way  control  the  quantities  of  fresh  beef 
shipped  to  the  several  markets.  Such  an  agreement, 
even  if  faithfully  lived  up  to,  would  not  prevent  gluts  at 
individual  markets,  and  therefore  would  be  ineffective  to 
control  or  regulate  meat  prices.  There  is  absolutely  no 
form  of  agreement  that  affects  such  shipment  of  fresh 
beef  or  of  any  other  kind  of  meat. 

Page  78  At  the  top  of  page  78  of  the  Report,  the  Trade  Com- 
mission refers  to  "an  exchange  of  information  as  to  mar- 
gins," and  to  "a  periodical  inspection  of  the  supplies  in 
one  another's  coolers  at  the  principal  distributing 
points."  There  is  no  formal  interchange  of  information 
as  to  margins.  Occasionally  the  representative  of  one 
packer  might  tell  the  representative  of  another  that  "we 
made  'plus  30 '  last  week  in  New  York,"  as  is  shown  in 
the  Sulzberger  memoranda.  This  is  merely  an  occa- 
sional and  informal  interchange  of  information  concern- 
ing past  occurrences,  and  it  falls  far  short  of  formal  and 
organized  methods  of  exchanging  such  information,  as 


41 

used   by  open-price  associations    (see  page  28  above), 
which  apparently  have  the  sanction  of  the  law. 

Neither  is  there  a  "periodical  inspection"  of  the  sup- 
plies in  one  another's  coolers.  The  branch  house  mar- 
kets of  the  packers  are  really  open  markets,  which  any 
person  may  visit,  and  it  is  true  that  the  representative 
of  one  packer  often  visits  the  branch  houses  of  other 
packers  in  order  to  get  a  line  on  the  total  stocks  that  are 
available  for  distribution.  So  far  as  Swift  &  Company 
is  concerned,  at  least,  this  is  not  done  " periodically " 
nor  according  to  any  definite  plan.  If  it  can  be  impar- 
tially and  authoritatively  determined  that  such  occasional 
inspection  of  competitors '  stocks  is  in  any  way  unfair  or 
harmful,  Swift  &  Company  will  be  glad  to  discontinue  the 
practice. 

Taken  all  in  all,  therefore^  it  has  been  shown — 1,  that 
the  Federal  Trade  Commission  fails  to  prove  that  the 
fairly  constant  percentages  of  purchases  are  the  result 
of  agreements  among  the  packers;  2,  that  there  are 
enough  instances  of  variation  in  purchase  percentages, 
as  in  the  cases  of  St.  Paul,  South  Omaha,  and  Denver, 
to  prove  that  there  is  no  agreement  to  divide  receipts; 
3,  that  such  approach  to  uniformity  as  exists  is  the  result 
of  competitive  watchfulness  that  each  packer  keeps  on 
the  others ;  4,  that  even  if  there  were  an  agreed  division 
of  live-stock  receipts  this  would  carry  with  it  no  power 
to  control  prices  of  live  stock  in  the  various  markets  and 
no  power  to  control  the  prices  of  dressed  meats. 


42 


Alleged  Collusion  in  Live-Stock  Buying. 

Pages  The  Federal  Trade  Commission  claims  that  the  large 
78  to  99  packers  control  the  live-stock  markets  and  fix  live-stock 
prices  collusively  by  means  of  the  practices  known  as : 

"Part  purchases." 

' '  Split-shipments. ' ' 

"Wiring  on." 

" Making"  the  daily  market. 

It  will  be  shown  below  in  the  discussion  of  these  prac- 
tices that : 

1.  The  Trade  Commission  furnishes  no  evidence 
of  collusion  among  the  packers. 

2.  Perfectly   legitimate   business   practices   have 
been  described  in  such  a  way  as  to  give  the  impres- 
sion that  they  are  illegitimate  and  unfair. 

3.  In  attempting  to  establish  its  case,  the  Federal 
Trade  Commission  has  used  only  such  parts  of  in- 
formation collected  from  Swift  &  Company's  files  as 
appear  to  bear  out  its  contentions,  and  it  has  ac- 
tually   suppressed    other    information    which 
controverts    the    contentions    of   the    Commis- 
sion. 

Part  Purchases. 

Pages  The  "part  purchase"  plan  is  described  as  the  method 
78 to 84  whereby  "two  or  more  packers  join  in  purchasing  the 
live  stock  of  one  shipper  or  producer,  each  taking  a  part 
of  the  shipment  at  the  same  price."  Letters  and  tele- 
grams taken  from  Swift  &  Company's  files  are  intro- 
duced to  show  that  when  a  shipment  is  purchased  partly 
by  one  packer  and  partly  by  another,  the  prices  paid 
by  the  two  packers  are  commonly  identical.  On  page  82 
of  the  Report,  there  are  assembled  in  table  form  a  number 
of  such  instances.  The  conclusion  is  (top  of  page  83  of 
the  Report)  that  these  results  could  be  obtained  "only  by 
collusion." 


43 

The  facts  of  the  matter  are  as  follows : 

A  single  shipper  often  sends  a  number  of  carloads  of 
cattle  to  market  at  one  time,  and  the  animals  in  such  a 
shipment  are  usually  of  practically  the  same  type  and 
weight,  so  that  naturally  they  ought  to  bring  the  same 
price  on  any  given  day.  Swift  &  Company's  require- 
ments range  all  the  way  from  the  very  finest  cattle  to 
the  very  poorest,  and  it  is  often  impossible  for  us  to  use 
a  large  number  of  animals  of  one  type  and  weight.  The 
animals,  when  they  are  offered  for  sale,  are  placed  in 
different  pens,  and  our  buyer  often  bids  on  a  certain  part 
of  the  total  shipment,  not  feeling  that  he  can  use  them 
all.  In  making  his  bid  and  purchase  he  deals  only 
with  the  commission  man  and  enters  into  no  ar- 
rangement whatever  with  the  buyer  of  any  other 
packer  to  buy  the  animals  in  common,  or  to  divide 
the  total  shipment. 

After  the  commission  man  has  become  satisfied  that 
he  is  getting  the  highest  price  obtainable,  and  has  sold 
a  part  of  the  shipment  to  one  packer,  he  offers  the  re- 
mainder, or  part  of  the  remainder,  as  the  case  may  be, 
to  other  packers.  He  naturally  wishes  to  get  at  least 
as  high  a  price  for  the  remainder  of  the  shipment  as  he 
obtained  for  the  part  already  sold ;  otherwise  the  shipper 
whom  he  represents  would  be  dissatisfied,  knowing  that 
his  cattle  are  of  the  same  quality  and  weight  and  offered 
for  sale  on  the  same  day.  In  the  majority  of  cases,  he  is 
able  to  get  the  same  price,  and  this  accounts  for  the  fact 
that  the  prices  paid  by  different  packers  on  part  pur- 
chases are  very  often  identical. 

Since  no  packer  can  be  expected  to  buy  more  than  he 
needs  of  any  one  type  of  cattle,  and  since  the  packer's 
buyer  deals  only  with  the  commission  man  and  does  not 
connive  with  other  packers'  buyers, — and  since  the  whole 


44 

transaction  is  perfectly  legitimate  and  above-board,  it  is 
perfectly  obvious  that  the  Trade  Commission  has  wil- 
fully described  this  innocent  practice  in  such  a  .way  as 
to  unfairly  insinuate  wrong-doing  and  collusion. 

The  letters  and  telegrams  that  are  introduced  begin- 
ning with  page  79  in  the  Report,  are  simply  records  of 
completed  transactions  reported  by  one  representative 
of  Swift  &  Company  to  another  representative  of  the 
same  company,  and  offer  no  indications  whatever  of  col- 
lusion with  other  packers.  They  are  all  records  of  per- 
fectly legitimate  transactions — transactions  that  con- 
tinue today,  and  undoubtedly  always  will  continue  as  long 
as  we  make  the  painstaking  study  of  market  conditions 
and  prices  that  we  find  to  be  necessary  in  the  efficient 
conduct  of  our  business. 

As  positive  proof  of  the  Trade  Commission's  desire  to 
misrepresent  the  facts,  we  submit  the  following  letter, 
a  copy  of  which  was  taken  from  our  files  by  the 
Federal  Trade  Commission,  but  which  the  Trade 
Commission  failed  to  reproduce  in  its  published 
report.  This  letter  was  written  when  the  very  subject 
of  part  purchases  was  under  discussion  in  1916,  at  a  time 
prior  to  the  dates  of  most  of  the  instances  cited  by  the 
Trade  Commission  from  page  79  to  page  82  of  the  Re- 
port. 

Chicago,  April  20,  1916. 
Mr.  Louis  P.  Swift, 

Fourth  Floor.  ?'&$ 

Part  Purchases  4/19/1916. 

What  they  accuse  us  of,  we  understand  we  have  never  done, 
namely,  the  buyer  for  one  packer  has  never  bought  a  lot  of  cat- 
tle and  then  had  the  cattle  divided  and  turned  part  of  them  over 
to  another  packer.  This  is  what  they  accuse  us  of  doing,  and 
we  should  certainly  see  that  it  is  never  done. 

Their  proof,  however,  of  our  doing  this  is  the  account  sales  that 
the  shippers  get  from  the  commissionmen,  showing  for  example 
that  of  eighty  cattle,  forty  were  sold  to  Swift  and  40  to  Armour. 
This  merely  means  that  the  eighty  cattle  were  put  into  two  pens. 
Swift's  buyer  bought  one  pen  and  Armour's  the  other,  and  we 
should  not  give  our  buyers  any  instructions  to  discontinue  this 


45 

practice.  If  there  were  three  or  four  pens  belonging  to  one  ship- 
per and  we  wished  to  buy  one,  or  two,  or  three,  and  leave  the  rest, 
we  should  be  perfectly  free  to  do  so. 

Think  we  should,  however,  get  this  matter  up  squarely  before 
the  official  body  of  the  commission  men,  tell  them  what  we  are 
accused  of  doing,  what  we  understand  the  facts  to  be,  and  ask  them 
if  there  is  anything  wrong  with  the  way  we  handle  these  cases,  and 
what  suggestions  they  have.  Any  agreement  or  instructions  rela- 
tive to  our  not  bidding  under  these  circumstances  might  be  in  the 
nature  of  restraint  of  trade. 

JMC-IOB  J.   M.   CHAPLIN. 

CC-ADW-RCM 

This  letter  puts  the-  matter  in  its  true  light,  and  would 
have  completely  offset  the  Trade  Commission's  conten- 
tion of  collusion  if  it  had  been  included  in  the  report. 
It  also  appears  that  there  are  many  other  letters  in  our 
files  bearing  on  this  subject,  especially  during  1916  when 
the  officials  of  Swift  &  Company  were  studying  the  mat- 
ter closely  because  of  criticisms  that  had  been  made  at 
some  of  the  cattlemen 's  conventions.  The  criticisms  were 
leveled  principally  at  Fort  Worth,  where  there  are  only 
two  large  packers.  The  Trade  Commisison  had  access 
to  this  correspondence  but  did  not  take  any  of  it.  We 
have  found  in  our  files,  for  example,  the  following  letter 
which  was  written  by  Mr.  Harold  H.  Swift  to  our  Fort 
Worth  manager  in  February  of  1916,  which  also  explains 
the  situation : 

February  19,  1916. 
Personal 

Mr.  J.  B.  Googins, 
Swift  &  Company, 
Ft.  Worth,  Texas. 
Dear  Sir: 

There  has  been  a  good  deal  of  talk  around  cattle  conventions, 
especially  at  El  Paso,  but  also  at  other  points,  in  reference  to  lack 
of  competition  among  buyers  on  the  live  stock  markets. 

This,  I  suppose,  was  somewhat  aimed  at  Ft.  Worth  because  of 
there  being  only  the  two  packing  houses  there,  and  along  with 
this  was  coupled  the  criticism  of  dividing,  on  which  they  made  the 
point  that  it  is  practically  establishing  one  bid  instead  of  healthy 
competition. 

I  am  pretty  sure  that  the  idea  of  buying  only  part  of  a  string  of 
cattle  has  been  confounded  with  the  idea  of  dividing,  although,  of 
course,  I  realize  it  is  a  different  proposition,  and,  of  course,  our 
buyers  have  positive  instructions  not  to  divide.  While  they  do 
sometimes  buy  only  part  of  a  string,  on  account  of  considerable  agi- 
tation, and  the  fact  that  the  cattle  men  are  confounding  the  two 
subjects,  would  like  you  to  review  the  general  situation  with  our 


46 

live  stock  buyers   and   request  that   they   consider   the   policy   of 
buying  all  of  a  string  when  same  is  practical. 

Of  course,  realize  that  in  large  numbers  it  is  not  practical  for  us 
to  take  the  whole  string,  but  the  other  thing  may  be  true,  that  is 
that  in  smaller  numbers  we  might  just  as  well  take  the  whole 
string,  and  in  such  cases  would  like  you  to  do  so. 

Would  like  you  to  review  the  general  proposition  with  all  of  your 
live  stock  buyers  and  advise  me  how  you  will  handle  the  situation. 

Awaiting  .your  reply,  I  am 

Yours  truly, 
HHS-EAP  HAROLD  H.   SWIFT. 

It  also  appears  that  during  the  time  we  were  paying 
special  attention  to  this  matter  in  1916,  Mr.  L.  F.  Swift 
requested  our  Fort  Worth  manager  to  keep  a  complete 
record  from  week  to  week  of  all  part  purchases  in  the 
Fort  Worth  yards.  We  have  this  record  from  July,  1916, 
to  the  present.  In  its  tabulation  on  page  82  of  the  Report, 
the  Federal  Trade  Commission  reports  a  large  number 
of  instances  of  part  purchases  made  at  Fort  Worth,  and 
the  general  impression  is  given  that  this  is  an  extremely 
common  practice.  Reference  to  our  weekly  record,  which 
was  available  to,  but  not  used  by,  the  Commission,  shows 
that  the  practice  of  purchasing  only  part  of  a  shipment 
is  and  was  only  occasionally  resorted  to.  In  fact  during 
the  14-month  period  covered  by  the  Trade  Commission's 
instances  on  page  82  only  about  one  per  cent,  of  Swift 
&  Company's  total  purchases  at  Fort  Worth  were  made 
on  the  part-purchase  plan.  That  is  to  say,  the  Federal 
Trade  Commission  has  described  a  perfectly  proper 
practice,  (which,  however,  happens  only  occasionally),  as 
an  illegitimate  practice  carried  out  in  collusion  with  other 
packers  and  as  though  it  were  a  common  occurrence ! 
Page  so  Qne  or  two  other  points  in  connection  with  the  trans- 
actions reported  by  the  Commission  are  worthy  of  note. 
On  page  80  of  the  Report  the  Commission  reports  the  sale 
of  ten  loads  of  steers  shipped  by  A.  Matthews,  where  it 
is  shown  that  six  loads  went  to  Swift  at  $7.75,  and  three 
loads  to  Armour  at  $7.75.  The  original  letter  shows  $9.75 


47 

as  the  price  paid  by  Swift  &  Company,  and  although  this 
figure  in  the  original  letter  was  undoubtedly  incorrect, 
the  Federal  Trade  Commission  should  at  least  have  ex- 
plained that  it  changed  the  figure,  inasmuch  as  the  let- 
ter is  reproduced  in  full  in  its  original  form. 

The  figures  shown  in  the  tabulation  on  page  82  of  the 
Report  are  said  to  have  been  taken  from  "Swift  &  Com- 
pany records,"  and  there  is  a  list  of  prices  paid  to  Lan- 
dergin  Bros,  for  a  period  of  about  a  year  and  a  half  dur- 
ing 1916  and  1917.  Swift  &  Company  can  find  no  trace 
of  such  records  in  its  own  files.  Since  the  weights  of 
these  cattle  are  omitted,  and  since  Swift  &  Company 
would  have  kept  110  such  record  of  an  individual  shipper, 
we  believe  that  the  Trade  Commission  has  carelessly 
stated  that  the  information  was  obtained  from  Swift  & 
Company,  whereas  it  must  have  been  obtained  from  some 
other  source. 

Pages  Tli;/  Trade  Commission  reproduces  an  exchange  of  let- 
83&S4  ters  an(j  telegrams  between  L.  F.  Swift,  President  of  the 
Company,  and  A.  B.  Swift,  Manager  of  the  St.  Joseph 
plant,  referring  to  part  purchases  in  the  St.  Joseph  mar- 
ket, and  trying  to  make  out  that  there  was  collusion  with 
other  packers  in  "dividing"  receipts. 

All  that  these  letters  and  telegrams  mean  is  that  it 
had  been  the  custom  for  Swift  &  Company  to  purchase 
only  a  part  of  comparatively  small  shipments,  such  as 
those  consisting  of  five  or  six  cars.  Mr.  L.  F.  Swift  de- 
cided that  we  should  buy  larger  quantities  at  a  time,  and 
Page 83  issued  instruct irrs  that — ''when  cattle  suit  us  in  quality 
and  price  and  we  need  the  cattle,  and  they  are  not  over 
five  or  six  cars,  he  can  buy  them  all  any  time — but,  of 
course,  v.  hen  the  quantity  is  larger  or  the  quality  unde- 
sirable, it  is  probably  all  right  to  only  buy  one-third  or 
one-half." 


48 
/      * 
Perhaps  the  reason  that  the  Trade  Commission  used 

this  correspondence  in  order  to  show  collusion  was  that 
in  one  of  his  letters  Mr.  L.  F.  Swift  used  the  word  "di- 
viding" in  referring  to  the  purchasing  of  parts  of  single 
shipments.  This  was  merely  careless  phraseology  on  the 
part  of  Mr.  Swift.  In  one  sense,  the  purchasing  of  part 
of  a  shipment  does  mean  the  dividing  of  that  shipment 
with  other  packers,  but  not  in  the  sense  that  our  buyer 
would  connive  or  agree  with  the  buyer  of  another  packer 
to  purchase  the  cattle  together  or  to  divide  them  after 
they  were  purchased.  Because  of  his  interest  in  the  St. 
Joseph  yards,  as  explained  above  (page  32),  Mr.  Swift 
has  always  been  anxious  to  have  shippers  satisfied,  and 
he  merely  felt  that  in  this  case  we  could  give  the  market 
better  support  by  buying  larger  "strings"  of  cattle  than 
had  previously  been  our  custom. 

Split   Shipments. 

Pages  The  term  "split  shipments "  refers  to  instances  where 
84  to  89  shippers  divide  their  shipments  between  two  markets. 
The  point  made  by  the  Trade  Commission  is  that  split 
lots  are  sold  at  the  same  price  on  different  markets,  that 
the  packers  keep  a  check  on  all  such  shipments  and  see 
to  it  that  the  same  prices  are  paid  in  the  different  mar- 
kets. We  are  told  (page  85  of  the  Report)  that  "such 
sales  represent  collusion." 

In  our  constant  study  of  the  various  markets  we  are 
naturally  veiy  much  interested  to  know  whether  the 
prices  paid  for  cattle  of  the  same  type  and  weight  are  in 
line  with  each  other  in  different  markets,  and  this  matter 
can  best  be  studied  in  connection  with  shipments  split 
between  Kansas  City  and  St.  Joseph,  where  freight  rates 
are  practically  the  same,  and  where  the  prices,  therefore, 


49 

should  be  the  same.  All  of  the  cases  referred  to  in  the 
Trade  Commission's  report  cover  splits  between  Kansas 
City  and  St.  Joseph. 

Prior  to  the  spring  of  1916  it  is  true  that  Swift  &  Com- 
pany, when  it  learned  of  a  split  shipment  between  two 
markets,  frequently  wired  from  one  market  to  the  other, 
giving  information  of  such  split.  This  information  was 
given  by  one  Swift  buyer  to  another  Swift  buyer,  and 
there  was  no  collusion  with  other  packers.  The  letters 
and  telegrams  reproduced  by  the  Federal  Trade  Commis- 
sion give  absolutely  no  evidence  of  collusion.  Although 
we  have  been  unable  to  see  anything  wrong  in  wiring  from 
one  market  to  another  in  this  way,  we  practically  discon- 
tinued the  practice  in  1916,  owing  to  criticisms  that  were 
being  made.  We  prefer  to  lean  backward  in  the  matter 
rather  than  to  furnish  grounds  for  dissatisfaction  and 
suspicion.  During  the  period  covered  by  the  letters  and 
telegrams  reproduced  by  the  Federal  Trade  Commission, 
therefore,  Swift  &  Company  has  not  been  in  the  habit  of 
wiring  from  one  market  to  another  when  there  have  been 
split  shipments. 

The  judgment  of  cattle  buyers  is  so  nearly  perfect  that 
bids  on  cattle  of  the  same  weight  and  quality  in  St.  Joseph 
and  Kansas  City  on  the  same  day  would  naturally  be  very 
nearly  the  same,  if  not  exactly  the  same.  But  there  is 
another  and  more  potent  reason  for  the  exact  identity  in 
prices  between  these  two  markets,  which  occurs  frequent- 
ly, even  when  the  animals  are  bought  by  two  or  more  dif- 
ferent packers.  Many  of  the  commission  men  have  offices 
in  both  Kansas  City  and  St.  Joseph,  and  when  the  Kansas 
City  office  of  a  commission  man  learns  of  a  split  shipment 
between  Kansas  City  and  St.  Joseph  markets,  this  Kan- 
sas City  office  naturally  gets  in  touch  with  the  St.  Joseph 


50 

office,  undoubtedly  with  the  view  of  getting  the  same  price 
in  both  markets  if  possible.  Otherwise,  the  shipper  might 
think  that  the  commission  man  had  done  better  for  him 
in  one  market  than  in  the  other,  with  resulting  dissatis- 
faction over  the  price  received  in  the  lower  market.  Swift 
&  Company  understands  that  this  is  a  common  practice 
and  believes  that  it  accounts  for  the  frequent  identity  in 
prices  between  these  two  markets. 

In  its  tabulation  on  page  89  of  the  Report,  the  Trade 
Commission  presents  data  on  a  number  of  shipments 
split  between  St.  Joseph  and  Kansas  City.  Even  in  this 
tabulation  23  per  cent,  of  the  cases  show  a  slight  differ- 
ence in  price  between  St.  Joseph  and  Kansas  City,  and 
to  a  man  in  the  live-stock  or  packing  business,  it  is  not 
surprising  that  p'rices  paid  in  these  two  markets  at  the 
same  time  should  be  identical  in  about  three-quarters  of 
the  cases.  If  the  variation  were  any  greater  it  would  be  a 
matter  of  serious  concern  to  the  buying  department  of 
Swift  &  Company.  At  any  rate,  the  frequent  identity  in 
prices  is  not  evidence  of  collusion  between  the  different 
packers  as  explained  above. 

The  most  important  feature  of  the  Trade  Commission's 
discussion  of  split  shipments,  however,  is  the  fact  that 
in  compiling  the  figures  for  the  table,  which  appears  on 
page  89  of  the  Report,  the  Federal  Trade  Commis- 
sion used  only  such  parts  of  telegrams  taken  from 
our  files  as  seemed  to  bear  out  its  contention  that 
prices  are  identical  on  split  shipments  to  St. 
Joseph  and  Kansas  City,  and  purposely  omitted 
other  items  in  the  same  telegrams  which  showed 
differences  im  prices. 

To  prove  the  truth  of  this  statement,  we  submit  the 
following  telegrams,  copies  of  which  were  taken  from 


51 


Not  used 
by  F.  T.  C. 


our  files  by  the  Federal  Trade  Commission,  but  only  parts 
of  which  were  used  in  the,  tabulation  on  page  89  of  the 
Report.  Portions  which  are  shown  in  italics  were  not 
used  by  Trade  Commission.  In  one  case  it  will  be  no- 
ticed that  the  complete  telegram  is  omitted. 

St.   Joseph,   Mo.    2/28/1916.    . 
Leavitt 

4  loads  pulp  fed  steers  account  S.  Karsh  sold  here  today  to  Mor- 
'    ris  133 '4# 8.20 
(       ?  loads  same  cattle  sold  K  C  to  SdS  1324  #  S.35 

2  loads  pulp  fed  steers  account  Prey  Bros,  sold  here  today  to 
Hammond  1276#  8.15 

2  loads  same  cattle  sold  KG  today  S&S  1274  #  8.15 
Copy  to  LFS  EFS  CHS 

Vance 


Not  used 
by  F.  T.  C. 


Not  used 
by  F.  T.  C. 


Not  used 


Ingwersen 

St.  Joseph  6/16/1915 

We  bought  2  loads  Gebhardt  &  Son  Colorado  steers  here  today 
average  1311  #  at  8.65  3  loads  same  sold  KG  today  1302 #  8.15 
to  Morris  with  3  cattle  out  at  1.50  Morris  bought  here  today  7 
loads  Oklahoma  natives  account  Vancellous  average  1191  #  at  8.45 
9  loads  same  cattle  sold  KG  today  1249  #  8.35  with  2  out  at  7.50. 
Copy  to  LFS  EFS  CHS 

Vance 

St.  Joseph  2/21/1916 
Leavitt 

2  loads  pulp  cattle  account  Ludlow  sold  here  today  to  Hammond 
1398#  8.00 

2  loads  same  cattle  sold  K  C  today  to  Armour  1404 #  8.00 
We   bought  here   today  3   loads  pulp  cattle  account  Prey  Bros. 
1294  #  8.00     3  loads  same  cattle  sold  K  C  today  to  Morris  130 /# 
I    7.95  ' 

Copy  to  LFS  EFS  CHS  Vance 

St.  Joseph  8/25/1915 
Leavitt 

We  bought  4  loads  Russell  &  W  cattle  here  Tuesday  875  #  6.90 
4  loads  same  cattle  sold  Kansas  City  to  Cudahy  885 #  6.90 
f       1  load  By  water  cattle  here  Tuesday  sold  Morris  1370  #  9.10 


by  F.  T.  C.   \       2  loads  these  cattle  sold  K  C  to  S&S  1288#  8.90 
Copy  to  LFS  EFS  CHS  Tamblyn 


Not  used 
by  F.  T.  C. 


St.  Joseph  1/18/1916 
Tamblyn 

3  loads  pulp  cattle  here  Monday  account  James  Bros,  sold  Ham- 
mond 1087  #   7.75 

3  loads  same  cattle  sold  K  C  to  Cudahy  as  follows: 
2  loads  1159#  7.50 

1  load     1051  #  7.60 

4  loads  Miller  Bros.,  Westerns  sold  here  Monday  as  follows: 

2  loads  Swift  1030#  6.90 

2  loads  Morris  1046#  6.90 

4  loads  same  cattle  sold  K  C  as  follows: 

3  loads  Swift  1058#  6.90 

1  load  feeder  buyers  945  #  7.00 
Copy  to  LFS  EFS  CHS  Ingwersen 


52 

In  conclusion,  with  regard  to  split  shipments,  it 
has  been  shown  that  the  Federal  Trade  Commission  de- 
scribed a  perfectly  legitimate  practice  as  though  it  were 
a  means  of  collusion  between  the  packers,  and  that  in 
.trying  to  show  that  the  prices  are  the  same  on  split  ship- 
ments, it  actually  omitted  parts  of  telegrams,  which  show 
differences  in  price.  Finally,  in  explaining  the  fact  that 
prices  are  frequently  identical,  the  Commission  omitted 
the  true  explanation,  which  it  could  have  known,  and 
should  have  known,  if  it  had  really  studied  both  sides  of 
the  question. 

Wiring  On. 

Another  form  of  alleged  collusion  between  the  packers 
is  fae  claim  that  when  cattle  are  received  in  one  market 
and  the  seller  or  commission  man  is  not  satisfied  with  the 
price,  and  consequently  ships  them  to  another  market,  the 
buyer  in  the  first  market  wires  the  buyer  in  the  second 
market,  notifying  him  the  price  that  he  offered.  The 
Trade  Commission  claims  that  this  is  done  for  the  pur- 
pose of  discouraging  the  forwarding  of  cattle  from  one 
market  to  another,  and  the  Commission  specifically  says 
(bottom  of  page  89  of  the  Report)  that  "the  packer  buy- 
ers at  the  second  market  bid  at  prices  no  greater  and  often 
less  than  those  offered  the  shipper  at  the  first  market, 
thus  causing  him  to  lose  the  freight  and  shrinkage  in  the 
weight  of  his  stock. ' ' 

The  discussion  of  this  matter  furnishes  one  of  the  most 
glaring  instances  of  perversion  of  fact  and  actual  sup- 
pression of  data  taken  from  packers '  files  to  be  found  in 
Part  II  of  the  Trade  Commission's  Report. 

The  practice  of  wiring  on  is  in  itself  perfectly  legiti- 
mate. Suppose  a  buyer  for  Marshall  Field  &  Company, 
located  in  New  York,  were  offered  a  bill  of  goods  at  a  price 


53 

which  he  was  unwilling  to  pay.  The  seller  of  these  goods 
decides  to  go  to  Chicago  and  approach  a  Marshall  Field 
buyer  there.  The  New  York  buyer  naturally  wires  the 
Chicago  buyer,  stating  the  price  that  he  has  offered. 

Although  Swift  &  Company  has  always  realized  that 
there  is  nothing  wrong  in  this  practice,  it  practically  dis- 
continued it  in  the  spring  of  1916,  due  to  criticisms  and 
suspicions  on  the  part  of  shippers.  The  Federal  Trade 
Commission  undoubtedly  knew  of  this  action,  and  at  least 
could  have  known  of  it,  but  did  not  mention  it  in  its  re- 
port. 

It  should  be  noted  that  all  of  the  telegrams  reproduced 
by  the  Trade  Commission,  from  pages  90  to  93  of  the 
Report,  with  the  exception  of  the  first  one  on  page  90, 
are  not  examples  of  wiring  on  at  all.  They  are  merely 
records  of  completed  transactions, — letters  sent  out  after 
the  animals  have  been  received  and  sold  in  the  second 
market,  merely  to  give  market  information  that  all  our 
buyers  are  interested  in. 

The  apparent  object  of  introducing  these  telegrams  is 
to  bear  out  the  Trade  Commission's  statement  that  "the 
packer  buyers  at  the  second  market  bid  at  prices  no 
greater  and  often  less  than  those  offered  the  shipper  at 
the  first  market."  In  the  main,  the  telegrams  that  are 
reproduced  bear  out  this  contention,  but  the  important 
point  is  that  the  Trade  Commission  purposely 
omitted  several  letters  which  were  taken  from 
Swift  &  Company's  files,  but  which  show  higher 
prices  paid  in  the  second  market  than  were  bid  in 
the  first  market. 

The  following  are  examples  of  such  letters  and 
telegrams,  which  were  taken  from  our  files  by  the 
Trade  Commission  but  were  not  reproduced  in  the 


54 

report.  They  absolutely  controvert  the  statement 
made  by  the  Federal  Trade  Commission  at  the  bot- 
tom of  page  89: 

Chicago,  Nov.  7,  1917. 
Mr.  Charles  H.  Swift, 
General  Office. 

Dear  Sir: 

Barse  forwarded  from  Ft.  Worth  Saturday,  the  3rd,  15  loads  grass 
steers,  sold  St.  Louis  as  follows: 

Bid  Ft.  Worth  Saturday,  the  3rd.          Sold  St.  Louis  Nov.  7th. 

15  loads  grass  steers  7.00                        238  cattle  712#  7.65  Morris    • 

held     at            7.50                               120  "       721#  7.65  Armour 

91  "       727#  7.65  Swift 
Yours  respectfully 

WL*PS  (Sgd)     W.  Leavitt 
Copy  to  LFS  EFS 


November  16th,  1917. 
Mr.  Charles  H.  Swift, 
General  Office. 

Dear  Sir: 

Referring  to  my  letter  of  Nov.  14th  reporting  on  2  loads  natives 
forwarded  from  St.  Joseph  Nov.  13th  billed  W.  F.  Clay,  please  cancel 
this  letter  and  substitute  the  following: 

2  loads  W.  F.  Clay  cattle  arrived  Thursday  from  St.  Joseph  and 
were  sold  at  Chicago  Nov.  16th  as  follows: 

Bid  on  St.  Joseph  market  11/13  Sold  Chicago  11/16 


2  loads  natives  avg.  ard.  1350#  11.75        2  loads  natives  1300#  13c 

With  2  out  @  12c 
Yours  respectfully, 

ES  (Sgd)     W.  Leavitt 

LFS  EFS 


Chicago,  Dec.  31,  1917 
Mr.  Charles  H.  Swift, 
General  Office. 

Dear  Sir: 

S.  Nelson,  speculator,  shipped  from  St.  Paul  Thursday,  the  27th, 
one  car  cattle;  sold  Chicago  Monday,  the  31st,  as  follows: 

Bought  St.  Paul  Thursday  12/27     Sold  Chicago  Monday  12/31 


23  cattle  8.75  15  steers  918#  9.25  Daniels 

4  cows  897#  7.50  Armour 

3  cows  883 #  6.00 

1  bull  600#  7.00  Libby 
Yours  respectfully, 

WL*PS  (Sgd)     W.  Leavitt 

Copy  to  LFS  EFS 


Chicago,  Oct.  25,  1917 
Mr.  Charles  H.  Swift, 
General  Office. 

Dear  Sir: 

Place  &  Geritts  forwarded  from  Milwaukee  Wednesday,  the  24th. 
3  loads  steers  sold  Chicago  today  as  follows: 

Bid  Milwaukee  10/24  Sold  Chicago  10/25: 


f>  i  steers 
10  steers 


WL*PS 
Copy  to  LFS  EFS 


9L25 
7.50 


1  load 
1      " 

1      " 


9.85  Kellar 
9.75 
10.00  Swift 


Yours  respectfully, 


(SgdJ     W.  Leavitt 


Chicago,  June  23,  1916 
Mr.  Charles  H.  Swift, 
General  Office. 

Dear  Sir: 

Landers  &  Hess  forwarded  from  St.  Louis  Wednesday,  the  21st, 
one  car  native  steers  —  sold  Chicago  as  follows: 

Bid  St.  Louis  June  21st  Sold  Chicago  June  23rd 

one  load  native  steers  bid  9.40  1  load  native  steers  9.75  S&S 

Afterwards  could  not  get  price. 

Prey  Bros,  forwarded  from  St.  Joseph  Tuesday,  the  20th,  3  loads 
pulp  cattle  sold  St.  Louis  as  follows: 

Bid  St.  Joseph  Monday  6/19  Sold  St.  Louis  Wednesday  6/21 


3  loads  pulp  cattle  9.25 
Held  at  9.50 


S*PS 

Copy  to  LFS  EFS 


3  loads  pulp  cattle  1158#  9.00 
Morris 
Yours  respectfully, 

(Signed)     W.  Leavitt 


Chicago,  June  26,  1916 
Mr.  Charles  H.  Swift, 
General  Office. 

Dear  Sir: 

Clay   Robinson   forwarded    from   Omaha   Thursday,   the   22nd,    4 
loads  cattle  —  sold  here  today: 

Bid  Omaha  Thursday,  the  22nd 
4  loads  good  heavy  dehorned 


Sold  Chicago  Monday,  the  26th 


white  faced  steers  10.50 


S*PS 

Copy  to  LFS  EFS 


4  loads  good  heavy  dehorned 
white  faced  steers  10.65  S&S 
with  one  steer  out  at  9.50 

Yours  respectfully, 

(Signed)     W.  Leavitt 


56 

Chicago,   Sept.  27th,   1916 
Mr.  Charles  H.  Swift, 

General  Office. 
Dear  Sir: 

National  forwarded  from  St.  Louis  Tuesday,  Sept.  26th,  2  loads 
native  steers — sold  Chicago  today  as  follows: 

Bid  St.  Louis  Sept.  26th  Sold  Chicago  Sept.  27th 

3  cars  50  native  steers  9.25  50 — 1162  #     9.50  Armour 

Afterwards  could  not  get  price 

Yours  respectfully, 

(Signed)     W.  Leavitt 
LFS  EFS 

Chicago,   Nov.   24,  1916 
Mr.  Charles  H.  Swift, 

General  Office. 
Dear  Sir: 

Moody  Com.  Co.  forwarded  from  St.  Louis  Thursday,  Nov.  23rd, 
to  Chicago  the  following  cattle: 

Bid  St.  Louis  Nov.  23rd  Sold  Chicago  Nov.  24th 

34  native  ylg.  cattle  6.25  13  steers      1045#  7.10  Wilson 

15  ylg.  cattle  754#  6.35  Swift 

6     "         "      754#  6.00       " 
Yours  respectfully, 
LFS  EFS  f  Signed)      W.  Leavitt 

Chicago,   May   11,   1917 
Mr.  Charles  H.  Swift, 

General  Office. 
Dear  Sir: 

Johnson  Bruber  forwarded  from  St.  Paul  May  9th  26  steers  as 
follows: 

Bid  St.  Paul  May  9th  Sold  Chicago  May  llth 

26  steers  speculators  10.50  with  5  out  26  steers  11.10  Morris 

which  did  not  bid  Thursday's  market 

Gall  Bros,  forwarded  from  St.  Paul  May  10th  1  car  22  steers  as 
follows: 

Bid  St.  Paul  May  10th  Sold  Chicago  May  llth 
22  steers                10.75  22  steers  11.50  Morris 

Yours  respectfully, 

LFS  EFS  (Signed)     W.  Leavitt 

Chicago,  June  27,  1917 
Mr.  Charles  H.  Swift, 

General  Office. 
Dear  Sir: 

Austin,   Hamil.   and   Dickson   forwarded   from    St.    Joe   Monday, 
June  25th,  3  cars  natives  as  follows: 

Bid  St.  Joe  6/25  Sold  Chicago  6/27 

2  loads  weigh  1600#   13.45  3  loads  1480 #  13.65 

1      "  13.55  Armour 

Yours  respectfully, 
LFS  EFS  (Signed)     W.  Leavitt 


57 

Chicago,  August  8,  1917 
Mr.  Charles  H.  Swift, 

General  Office. 
Dear  Sir: 

Milton   Marshall   forwarded   August  7th   from   St.   Louis   2   cars 
native  steers  as  follows: 

Bid  St.  Louis  8/7  Sold  Chicago  8/8 

2  cars  native  steers  12.60  2  cars  native  steers  13.00  Swift 

Yours  respectfully, 
LFS  EFS  (Signed)     W.  Leavitt 

By  introducing  these  communications  Swift  &  Company 
does  not  mean  to  give  the  impression  that  prices  paid  in 
the  second  market  on  forwarded  shipments  are  ordinarily 
higher  than  the  prices  paid  in  the  first  market.  As  a  mat- 
ter of  fact,  if  the  cattle  are  judged  correctly,  and  if  the 
market  does  not  change  in  the  meantime,  the  forwarding 
of  shipments  from  one  market  to  another  would  ordi- 
narily result  in  loss  to  the  shipper.  The  Chicago  price, 
for  example,  is  higher  than  the  Omaha  price,  but  the 
difference  between  the  two  is  not  equal  to  the  full  cost  of 
freight  plus  sufficient  allowance  for  shrinkage  of  animals 
in  transit.  Other  items,  such  as  the  cost  of  hauling 
dressed  meat,  are  factors  in  the  competitive  determina- 
tion of  market  differentials. 

In  conclusion,  with  regard  to  wiring  on,  it  has  again 
been  shown  that  the  Trade  Commission  has  resorted  to 
the  suppression  of  data  taken  from  our  files,  which  con- 
trovert its  own  contention;  that  it  has  described  a  per- 
fectly legitimate  practice  as  though  it  were  illegitimate; 
and  that  it  has  charged  the  packers  with  collusion,  with- 
out introducing  a  single  bit  of  evidence  that  such  col- 
lusion exists. 

Alleged  "Making"  the  Daily  Market. 

The  charge  is  that  "the  big  packers  act  in  concert  to 
make  and  control  the  market."  The  evidence  given  in 
support  of  this  charge  is  principally  that  the  market  on 


58 

any  given  clay  does  not  settle  down  to  a  definite,  price 
until  the  large  packers  send  their  buyers  out  into  the 
yards,  and  that  these  buyers  of  the  large  packers  fre- 
quently stay  off  the  market  until  10  or  11  o'clock,  or  until 
even  after  the  noon  hour.  It  is  also  alleged  that  when 
the  packers  enter  the  market  late  in  the  day  the  buyers 
of  all  the  different  companies  go  out  into  the  yards  at  the 
same  time. 

As  for  staying  off  the  market  until  late  in  the  fore- 
noon, we  admit  that  this  has  occasionally  been  done,  and 
that  naturally  we  have  sometimes  held  off  in  this  way 
with  the  hope  of  buying  live  stock  at  a,  lower  price.  There 
are  some  days  when  we  are  loaded  up  with  all  the  live 
stock  we  want,  or  when  the  markets  for  dressed  meats  are 
in  bad  condition,  so  that  we  know  that  we  have  got  to 
buy  stuff  cheaper  if  we  possibly  can,  in  order  to  make 
our  normal  profit  of  a  fraction  of  a  cent  a  pound  in  dis- 
posing of  our  product.  Under  such  conditions,  there' are 
many  times  when  we  should  prefer  not  to  buy  live  stock 
at  all.  and  it  is  only  the  need  of  taking  care  of  our  es- 
tablished trade,  and  our  assuming  of  a  moral  responsi- 
bility to  do  our  share  in  clearing  the  market  of  live  stock 
from  day  to  day  that  makes  us  willing  to  purchase  at 
all.  We  are  really  under  no  legal  or  moral  obligation  to 
begin  buying  at  8  o'clock  in  the  morning;  there  is  no  rea- 
son why  we  should  not  enter  the  market  until  2  o'clock 
in  the  afternoon  if  the  prevailing  prices  appear  unwar- 
ranted, or  if  we  do  not  need  material  to  keep  our  plants 
operating.  We  naturally  buy  animals  at  as  low  a  price  as 
possible;  otherwise  we  should  not  make  our  fraction  of  a 
cent  per  pound  profit  and  we  should  have  to  go  out  of 
the  packing  business. 

There  is  one  other  important  reason  for  late  buying, 
however,  that  the  Federal  Trade  Comniission  does  not 


59 

mention, — and  one  that  has  been  particularly  important 
within  the  past  two  years  when  live-stock  receipts  have 
been  extremely  heavy,  and  transportation  conditions  have 
been  more  or  less  chaotic.  The  reason  is  that  frequently 
a  substantial  portion  of  the  receipts,  especially  at  Chi- 
cago, is  not  unloaded  by  the  railroads  until  well  into  the 
forenoon,  and  that  therefore  it  is  rather  late  in  the  day 
before  the  commission  men  have  the  animals  watered  and 
fed  and  ready  for  sale.  Under  such  conditions,  Swift  & 
Company  generally  prefers  to  wait  until  all  or  nearly  all 
of  the  live-stock  is  ready  for  sale,  because  in  buying  for 
our  day's  requirements,  we  want  to  have  a  chance  to  in- 
spect all  of  the  offerings.  A  situation  of  this  sort  is  illus- 
trated by  the  telegram  reproduced  on  the  middle  of  page 
98 of  the  Report,  signed  "Garry,"  where  it  says  "50  cars 
back  will  go  slow  on  balance."  This  shows  that  there 
were  still  50  cars  of  hogs  to  be  unloaded,  and  that  the 
buyer  would  therefore  postpone  his  buying. 

It  is  perfectly  natural  that  the  commission  men  should 
sometimes  be  dissatisfied  to  have  the  large  packers  enter 
the  market  late,  and  it  was  their  feeling  on  this  score  that 
prompted  their  protest  back  in  1916,  reproduced  on  pages 
94  and  95  of  the  Report.  As  a  result  of  that  protest,  and 
informal  protests  of  a  similar  nature,  Swift  &  Company 
has  tried  to  make  it  a  point  within  the  past  few  years 
to  have  its  buyers  go  out  into  the  yards  at  an  earlier 
hour  than  formerly,  even  when  there  was  little  for  them 
to  do,  and  when  a  large  portion  of  the  day's  receipts 
was  not  ready  for  inspection.  Swift  &  Company  is  will- 
ing, and  has  always  stood  ready,  to  do  whatever  is  reason- 
able in  order  to  satisfy  the  demands  of  commission  men 
and  shippers  in  a  case  of  this  sort. 

As  for  the  charge  that  the  buyers  of  the  different  pack- 
ers appear  on  the  market  at  the  same,  or  approximately 


60 

the  same  time, — whenever  this  happens  it  is  not  the  re- 
sult of  collusion.  Each  packer  keeps  a  close  watch  on  the 
day's  receipts  and  knows  when  a  sufficient  number  has 
been  unloaded  from  the  cars  and  is  ready  to  be  bid  on, 
and  each  packer  also  keeps  a  close  watch  on  the  buying 
activities  of  the  other  packers.  Where  packers  have 
been  holding  off  the  market  until  10  or  11  o'clock  in  the 
morning,  the  appearance  of  the  buyers  of  one  packer  is 
usually  the  signal  for  the  buyers  of  the  other  packers 
to  go  out  through  the  pens  in  order  to  make  their  bids 
on  the  offerings  of  the  day.  Otherwise,  the  buyers  of 
the  first  packer  who  enter  the  market  are  likely  to  pick 
up  some  of  the  choicest  offerings  of  the  day. 
Page  96  The  telegrams,  reproduced  on  pages  96  to  99  of  the 
Report,  show  nothing  that  is  illegitimate  and  contain 
absolutely  no  evidence  of  collusion  between  the  different 
packers.  The  first  telegram,  on  page  96  of  the  Report,  is 
particularly  worthy  of  mention  as  it  indicates  how  care- 
lessly the  Trade  Commission  went  into  this  matter,  and 
how  carefully  it  avoided  the  obtaining  of  true  explana- 
tions of  the  material  presented  in  the  Report. 

This  telegram  reads  as  follows: 

Feb.  22nd   18 
17  JC 

Hogs  opened  40/50  higher  trying  buy  steady  yesterday  average. 

Swift. 

It  is  explained  tha't  "17  J  CM  is  "apparently  a  code 
address,"  and  that  "It  amounts  to  an  instruction  to  17 
J  C  to  buy  steady."  The  interesting  features  of  this 
telegram  and  explanation  are  that  "J  C"  stands  for 
Jersey  City;  that  the  telegram  was  ordinary  market  in- 
formation that  we  send  to  our  Jersey  City  plant  regu- 
larly; that  Jersey  City  buys  no  hogs,  and  that  the  hogs 
killed  there  are  bought  in  the  West  and  shipped  to  that 
point,  (except  occasionally  a  few  that  are  bought  direct 


61 

in  Buffalo) ;  and  that,  therefore,  the  telegram 
"instruction"  at  all.    Furthermore,  if  it  had  been 
struction  to  "try  to  buy  steady,"  there  would  have  been 
nothing  illegitimate  even  then ! 

We  might  go  on  and  analyze  each  of  the  telegrams  ap- 
pearing on  pages  96-99  of  the  Report,  and  show  that  these 
represent  nothing  but  perfectly  legitimate  practices  which 
go  on  from  day  to  day,  and  which  will  necessarily  con- 
tinue in  the  future.  The  Trade  Commission  apparently 
bases  its  charge  of  collusion  largely  on  the  fact  that  one 
telegram,  signed  "Olson,"  (middle  of  page  96  of  the  Re- 
port), contains  the  phrase — "packers  trying  for  steady." 
This  does  not  mean  that  there  is  any  collusion  among 
the  packers.  It  merely  means  that  the  sender  of  this 
telegram  knew,  from  his  observation  of  the  activities  on 
the  market  on  that  particular  day,  that  not  only  his  com- 
pany, but  also  the  other  companies,  were  trying  to  buy 
at  prices  that  had  prevailed  on  the  previous  day,  rather 
than  to  buy  at  the  higher  price  at  which  the  market  had 
opened. 

Although  it  is  of  course  true  that  since  the  large  pack- 
ers are  the  principal  buyers,  their  bids  have  the  greatest 
influence  in  establishing  the  price  from  day  to  day,  it  is 
not  mentioned  by  the  Trade  Commission  that  the  price 
goes  up  as  frequently  as  it  goes  down.  In  fact,  during 
the  past  few  years  the  general  tendency  has  been  decid- 
edly and  conspicuously  upward.  There  is  absolutely  noth- 
ing wrong  in  having  our  head  buyins*  office  at  Chicago 
instruct  our  buying  offices  in  other  markets  as  to  how 
many  animals  they  shall  buy,  or  at  what  price  they  shall 
"try"  to  buy  them.  The  only  possibility  of  harm  is 
through  agreement  or  collusion  among  the  different  pack- 
ers, and  although  the  Trade  Commission  says  that  there 


62 

• 
is  such  collusion  it  offers  absolutely  no  evidence  that 

such  is  the  case,  and  it  is  unable  to  cite  a  single 
instance  where  the  price  has  been  collusively 
manipulated  either  up  or  down. 

To  a  person  in  the  packing  business  it  seems  absurd 
to  have  to  explain  at  all  the  Trade  Commission's  dis- 
cussion of  "  making "  the  daily  market.  It  has  been 
shown,  however,  that  the  Commission  has  described  per- 
fectly legitimate  practices  in  such  a  way  as  to  make  it 
appear  that  the  packers  have  some  arbitrary  power  to 
fix  the  market  price,  and  that  they  have  acted  in  col- 
lusion in  making  their  purchases, — without  giving  a  sin- 
gle bit  of  evidence  to  corroborate  this  contention. 

International  Meat  Pool. 

Pages        ^his  matter  can  be  disposed  of  with  a  few  words :  first, 
99  to  107because  it  is  not  particularly  germane  to  the  question  of 
combination  among  the  packers  in  the  United  States, 
and  second,  because  there  are  no  arrangements  concern- 
ing shipments  from  South  America  which  are  not  clearly 
.  legal,  and  open  and  above-board. 

The  charge  is  that  the  large  packers  have  a  "com- 
bin^tion"  with  certain  British  and  South  American  com- 
panies to  regulate  and  divide  shipments  of  beef  and  mut- 
ton to  the  United  States,  and  certain  foreign  countries, 
particularly  England. 

The  charge  that  there  is  such  an  agreement  to  regulate 
shipments  to  the  United  States  is  untrue.  The  charge 
that  there  is  such  ah  agreement  to  regulate  shipments 
from  South  America  to  England  has  a  certain  basis  of 
truth. 

The  truth  of  this  matter  is  that  for  several  years  the 
large  American  packers  have  had  arrangements  with  each 


63 

other  and  with  certain  foreign  companies  providing  for 
the  proportion  of  total  shipments  that  each  should  carry 
between  South  America  and  England.  Such  a  division 
of  business  was  not  only  justifiable  because  it  helped  to 
make  more  regular  the  receipts  of  perishable  meats  in 
England,  but  the  arrangement  itself,  made  necessary 
largely  by  the  lack  of  adequate  boat  space,  was  not  secret, 
and  was  countenanced  by  British  law.  Furthermore,  this 
arrangement  is  similar  to  the  form  of  co-operation  specifi- 
cally permitted  by  the  recent  Webb  Bill,  which  is  intended 
to  encourage  co-operation  in  exportation  on  the  part  of 
competing  firms  in  the  United  States. 

As  for  the  alleged  control  of  shipments  from  South 
America  to  the  United  States,  the  following  are  the  facts : 

Before  the  European  war  began  and  after  the  United 
States  import  duty  on  fresh  meat  had  been  removed, 
Swift  &  Company  (through  the  Swift  Beef  Company  of 
London)  made  a  contract  with  the  Lamport  &  Holt  Steam- 
ship Company  (a  British  company)  providing  for  a  cer- 
tain amount  of  space  to  be  used  by  Swift  &  Company  in 
shipments  from  South  America  to  the  United  States. 
Such  a  contract  was  made  necessary  by  the  fact  that 
there  had  been  practically  no  refrigerated  shipping  space 
in  the  South  America-New  York  trade,  and  that  iJfm- 
port  &  Holt  was  the  only  line  to  equip  itself  with  the 
necessary  refrigerated  vessels  to  give  regular  service. 
This  contract  was  made  independently  by  Swift  &  Com- 
pany, and  does  not  represent  in  any  way  an  agreed  di- 
vision of  shipments  with  the  other  packers.  Shipments 
to  the  United  Stat-  s  have  been  limited  only  by  amount 
of  steamship  space  offered,  and  Swift  &  Company  has 
continuously  been  in  the  market  for  all  space  obtainable. 

Our  London  representatives  have  always  been  under 
instructions  not  to  enter  into  agreements  with  other  pack- 


64 

ers  involving  division  of  shipments  to  the  United  States. 
During  the  war,  because  of  insufficiency  of  refrigerated 
vessels,  there  have  been  no  shipments  of  refrigerated 
meat  from  South  America  to  the  United  States,  and  ship- 
ments to  England  have  been  controlled  by  the  British 
Government. 

With  this  explanation  in  mind,  the  extracts  taken  from 
the  Sulzberger  memoranda,  reproduced  on  pages  100  to 
106  of  the  Report,  appear  more  or  less  absurd  when  of- 
fered by  the  Trade  Commission  as  evidence  of  combina- 
tion. In  fact,  there  are  parts  of  these  extracts  which 
clearly  show  that  the  contracts  made  by  the  different 
packers  for  shipping  space  to  the  United  States  were 
made  independently.  For  example:  at  the  top  of  page 
103  of  the  Report,  Mr.  Sulzberger  notes  that  the  Swift  & 
Company  contract  with  the  steamship  line  gave  Swift 
"one-third  of  total  space/'  and  that  he  "thought  this  a 
little  excessive  for  Swift."  In  other  words,  Swift  had 
gone  ahead  and  made  a  contract  with  the  steamship  com- 
pany without  reference  to  Mr.  Sulzberger 's  wishes  in 
the  matter.  Again,  at  the  bottom  of  page  103  of  the  Re- 
port, Mr.  Sulzberger  introduces  a  table  showing  the  per- 
centage of  shipments  to  the  United  States  made  by  each 
packer,  and  he- introduces  the  table  with  the  statement— 
"I  stated  that  the  United  States  shipments  as  arranged 
figured  about  as  follows,  which  figures  ;^ere  made  note 
of."  This  shows  that  the  other  packers  had  not  figured 
out  what  the  percentages  were,  and  that  therefore  the 
latter  could  not  have  been  based  on  an  agreement. 

Another  evidence  of  competition  in  foreign  business  is 
found  at  the  bottom  of  page  1 05  of  the  Report,  where  Mr. 
Sulzberger  infers,  from  remarks  mada  by  a  representa- 
tive of  Armour  &  Company,  that  that  company  had  a 
"Special  contract"  with  the  British  Government,  and 


65 

that  Armour  asked  him  not  to  mention  the  special  con- 
tracts, as  they  were  unknown  to  all ;  and  that  Swift  es- 
pecially "does  not  know  of  them."  This  indicates  that 
each  packer  was  making  the  best  arrangements  that  he 
could  irrespective  of  the  desires  of  the  other  packers. 

Although  the  Trade  Commission  introduced  this  evi- 
dence as  though  it  were  complete  and  final  with  regard 
to  the  arrangements  on  foreign  business,  the  Commission 
itself  is  apparently  a  little  skeptical  about  the  conclu- 
siveness  of  the  data  reproduced  in  the  report.  This  is 
evident  from  the  manner  in  which  it  closes  its  discussion 
on  page  107  of  the  Report,  where  it  says  that '  *  The  Black 
Book  memoranda  *  *  *  are  not  a  complete  account 
of  negotiations."  As  a  matter  of  fact,  these  extracts 
from  the  Sulzberger  memoranda  refer  to  occasional  and 
informal  exchanges  of  information  between  Mr.  Sulz- 
berger and  other  individual  packers.  It  has  been  ex- 
plained that  there  has  been  no  agreement  affecting  ship- 
ments to  the  United  States,  and  that  such  other  arrange- 
ment as  there  has  been,  allocating  boat  space  for  ship- 
ments from  South  America  to  England,  was  not  only 
justified  from  an  economic  point  of  view,  but  also  per- 
fectly right  from  a  legal  standpoint. 

Alleged  Collusion  in  Selling  Meat  Products  in  the 
United  States. 


Page  107  jn  trying  to  make  out  a  caso  that  the  large  packers 
act  in  collusion  in  selling  dressed  meat,  the  Trade  Com- 
mission falls  back  on  its  old  explanation  that  the  alleged 
division  of  live-stock  purchases  covers  the  amount  of 
dressed  meats  that  each  packer  will  have  for  sale ;  it  says 
that  inspection  of  one  another's  branch-house  stocks  en- 
ables the  packers  "to  prevent  an  over-supply  of  fresh 
meat  in  any  market";  that  prices  are  kept  uniform  by 


66 

th3  exchange  of  information  as  to  "margins"  on  the  sale 
of  meats;  and  that  retail  butchers  find  "no  perceptible 
difference  in  the  prices  charged  by  the  different  big  pack- 
ers/' It  also  explains  that  there  is  "rotation  in  price 
cutting/'  in  order  to  drive  small  packers  out  of  business. 

It  has  been  explained  that  there  is  no  agreed  division 
of  live-stock  purchases,  and  that  even  if  there  were  this 
would  not  involve  the  allocation  of  shipments  of  dressed 
meat  to  the  different  markets,  and  would  therefore  have 
no  effect  on  meat  prices.  It  has  also  been  explained  that 
Swift  &  Company  does  not  make  periodical  inspection 
of  stocks  in  competitors'  branch  houses,  but  that  occa- 
sionally visits  are  made  in  order  to  obtain  a  better  idea 
of  meat  stocks  available  for  sale. 

As  for  the  interchange  of  margins,  correspondence  is 
introduced  on  pages  110  to  114,  which  shows  that  occa- 
sionally one  packer  has  received,  directly  or  indirectly, 
results  achieved  by  other  packers  on  past  transactions 
in  various  markets.  We  can  see  no  harm  in  such  oc- 
casional and  informal  interchange  of  information.  There 
is  certainly  no  harm  done  if  a  representative  of  Swift  & 
Company  tells  a  representative  of  Armour  &  Company 
that  we  made  a  certain  margin  on  our  sales  in  Boston  the 
previous  week.  Such  occasional  exchange  of  information 
is  nothing  as  compared  with  the  organized  method  of  col- 
lecting and  exchanging  such  information's  practiced  in 
many  trades  under  the  form  of  open-price  associations. 
(See  page  28  above.) 

The  Trade  Commission  introduces  the  statement  that 
retail  butchers  found  "no  perceptible  difference  in  the 
prices  charged  by  the  different  big  packers,"  (bottom  of 
page  107  of  the  Report),  as  though  this  were  proof  that 
the  packers  sold  at  agreed  prices.  This  statement 


67 

illustrates  both  a  lack  of  grasp  of  economic  phenomena, 
and  an  omission  of  pertinent  and  salient  facts  which 
really  destroy  the  contention  that  the  Trade  Commission 
tries  to  establish. 

In  the  first  place,  the  fact  that  prices  become  approx- 
imately identical  in  any  one  market  is  the  result  of  com- 
petition. Every  person  who  has  studied  economics  knows 
that  in  a  well-organized  market-place  competitive  buy- 
ing and  selling  and  competitive  watchfulness  bring  about 
practically  a  single  price  at  any  one  time  for  products 
of  the  same  kind  and  quality.  On  the  other  hand,  com- 
petition does  not  work  out  perfectly  in  this  way  in  the 
meat  markets,  and  although  prices  charged  by  the  differ- 
ent packers  in  the  same  market  are  approximately  the 
same,  there  are  sufficient  variations  to  cause  retail  butch- 
ers to  shop  around  from  the  branch  house  of  one  packer 
to  the  branch  houses  of  the  others,  so  that  they  can  buy 
their  meat  to  the  best  advantage.  If  they  did  not  find 
differences  in  price  for  the  same  qualities  of  meat,  it 
would  not  be  worth  their  while  to  spend  as  much  time  as 
they  do  in  shopping  around.  This  fact  was  not  men- 
tioned by  the  Federal  Trade  Commission. 

Page  108  The  Trade  Commission  tries  to  give  the  impression 
that  the  large  packers  exert  a  control  over  prices  through 
the  use  of  their  " general  men."  It  is  true  that  the  dis- 
trict managers  of  large  sales  organizations  have  to  keep 
a  close  watch  on  prices,  shipments,  and  profits,  but  they 
in  no  way  have  agreements  with  other  packers,  and  their 
principal  duty  is  to  see  that  our  own  selling  houses  get 
the  best  price  they  can  for  their  products.  The  fact  that 
we  take  losses  so  frequently  on  fresh  meats  is  in  itself 
sufficient  evidence  that  our  sales  representatives  do  not 
collusively  control  the  price  of  meat.  The  diagram  on 
pages  30  and  31  of  the  1919  Swift  &  Company  Year 


68 

Book,  for  example,  shows  that  during  the  year  ended 
June  30,  1918,  we  either  made  no  money,  or  actually  lost 
money  on  our  sales  of  beef  and  beef  by-products  in  19 
out  of  the  52  weeks. 

A  letter  from  R.  C.  McManus  to  H.  B.  Collins,  repro- 
duced at  the  bottom  of  page  108  of  the  Report,  gives  an 
entirely  wrong  idea  of  the  motives  involved  in  writing  the 
letters.  It  will  be  explained  below  (pages  84  to  91), that 
we  have  been  doing  our  utmost  to  prevent  agreements 
among  our  local  agents  in  buying  cream.  This  letter  is 
merely  an  evidence  of  one  attempt  that  we  made  back  in 
1915  to  prevent  such  agreements.  It  was  entirely  unfair 
for  the  Trade  Commission  to  reproduce  this  letter  by 
itself  detached  from  other  correspondence  on  the  same 
subject,  such  as  that  appearing  on  pages  147  to  154  of 
the  Report. 

On  page  110  of  the  Report  it  is  said  that  the  "  large 
packers  buy  a  great  deal  of  fresh  meat  from  each  other, " 
and  that  the  object  is  "to  even  up  the  supply  between 
themselves  or  to  keep  prices  at  a  high  uniform  level. ' '  It 
is  perfectly  true  that  the  packers  often  buy  fresh  meat 
from  each  other,  but  the  Trade  Commission  gives  no 
evidence  that  the  object  of  this  practice  is  to  keep  prices 
at  a  "high  uniform  level";  and  the  Trade  Commission 
fails  to  present  the  true  explanation  of  this  perfectly 
legitimate  practice.  As  a  matter  of  fact,  each  packer  has 
a  certain  established  trade  which  he  wants  to  take  care 
of,  and  if  he  is  short  of  a  certain  quality  or  weight  of 
goods,  he  naturally  buys  them  of  another  packer  who  has 
nn  ample  supply.  This  is  commonly  done  in  all  trades, 
and  in  no  way  represents  a  form  of  collusion,  or  an  at- 
tempt to  regulate  supply  so  as  to  affect  prices. 


69 


Alleged    Collusive     Action     Toward     Small     Com- 
petitors. 

Pages  114     ^he  Trade  Commission  charges  that  the  large  packers 

to118   act  collusively  with  or  against  small  packers,  either  by 

having  agreements  with  them  as  to  prices,  or  by  taking 

turns  in  reducing  prices  in  order  to  drive  them  out  of 

business. 

The  alleged  price  agreement  at  Los  Angeles,  described 
at  the  bottom  of  page  114  of  the  Report,  does  not  involve 
Swift  &  Company,  as  we  have  no  packing  plant  in  that 
city.  As  for  the  charge  that  there  is  an  agreement  at 
Tacoma,  Washington,  where  the  Union  Meat  Company  is 
concerned,  it  will  be  noticed  that  the  Trade  Commission 
offers  no  real  evidence  of  the  existence  of  any  such  agree- 
ment, and  Swift  &  Company  can  only  deny  that  to  the 
best  of  its  knowledge  any  agreement  exists.  The  extent 
to  which  the  Trade  Commission  goes  in  trying  to  estab- 
lish its  case  is  illustrated  by  the  statement  that  small 
packers  at  Philadelphia  regularly  telephoned  to  the 
branch  houses  of  the  large  packers  to  secure  their  price 
quotations,  "which  they  closely  followed."  This  is,  of 
course,  a  very  common  practice,  and  in  no  way  shows 
collusion. 

The  Trade  Commission  makes  a  positive  statement 
that  the  large  packers  take  turns  in  cutting  prices  in  or- 
der to  drive  small  competitors  out  of  business,  and  on 
page  116  of  the  Report,  introduces  testimony  of  one 
Charles  H.  May,,  Manager  of  the  Farmers'  Co-operative 
Packing  Co.,  of  Madison,  Wisconsin.  A  careful  analysis 
of  this  testimony  shows  that  it  is  utterly  inadequate  as  a 
proof  of  rotation  in  price  cutting.  It  will  be  seen  that  Mr. 
May  testified  that  during  a  single  week  the  Plankinton 
Co.  (a  Swift  concern)  was  selling  beef  at  a  low  price,  and 


70 

that  Armour  &  Company  was  underselling  the  other 
packers  on  pork.  During  the  following  week,  Mr.  May 
said  that — "I  haven't  the  exhibit  of  it,  *  *  *  but 
'Cudahy  did  all  the  beef  business  in  Madison." 

We  fail  to  see  how  this  can  be  considered  as  -evidence 
of  rotation  in  price  cutting.  It  is  the  commonest  thing 
in  the  world  for  one  packer  to  undersell  the  others  on 
some  particular  product  with  which  he  may  be  loaded  up 
and  which  he  has  to  move.  To  single  out  two  weeks, 
and  to  show  that  during  the  first,  two  packers  had  the 
low  prices  on  two  different  products,  and  that  during  the 
second  a  third  packer  had  the  low  price  on  beef,  without 
even  introducing  any  evidence  that  this  was  true,  does 
not  seem  to  us  to  constitute .  sufficient  evidence  to  make 
such  a  serious  charge,  especially  as  Swift  &  Company 
does  not  and  would  not  resort  to  this  practice, — if  for 
no  other  reason  than  that  we  know  the  practice  to  be 
illegal. 

The  charge  that  there  is  rotation  in  price  cutting  in 
Salt  Lake  City  (page  117  of  the  Report)  is  entirely  un- 
supported by  evidence,  and  we  are  tempted  to  suggest 
that  if  such  evidence  as  the  Trade  Commission  may  have 
in  its  possession  were  introduced,  it  would  furnish  no 
better  evidence  of  price  cutting  by  agreement  than  is 
introduced  in  connection  with  its  charge  that  there  is 
"  rotation  in  local  price  cutting  *  *  *  at  San  Antonio, 
Texas."  This  evidence,  beginning  at  the  middle  of  page 
117  of  the  Report,  contains  a  statement  by  one  local 
packer  that — "  These  big  fellows  seem  to  be  taking  turn- 
about at  selling  very  cheap,"  and  we  are  further  in- 
formed that  the  local  managers  of  Armour  &  Company 
and  -Swift  &  Company  have  complained  that  the  plants 
often  shipped  them  a  great  deal  more  meat  than  they 
ordered,  with  the  result  that  thev  have  had  to  reduce 


71 

the  prices  in  order  to  move  their  stocks.  In  the  first 
place,  it  will  be  seen  that  not  even  the  small  packer  at 
San  Antonio  has  evidence  that  there  is  rotation  in  price 
cutting,  and  in  the  second  place  it  should  be  explained 
that  the  shipment  of  larger  supplies  than  are 
ordered  by  local  managers  is  a  very  common  oc- 
currence with  Swift  &  Company  all  over  the  coun- 
try, and  in  no  way  indicates  or  results  in  illegitimate 
price  cutting.  The  sum  total  of  estimated  requirements 
as  reported  to  our  plants  by  our  branch-house  managers 
may  provide  an  outlet  for  only  two-thirds  of  our  total 
supplies  of  meat,  and  we  naturally  have  to  give  them 
more  than  they  want  in  order  to  move  these  supplies, 
even  if  the  local  managers  have  to  reduce  prices  in  order 
to  induce  greater  consumption. 

We  repeat  that  this  is  pretty  slim  evidence  for  the 
Trade  Commission  to  use  as  a  basis'  for  such  a  serious 
charge  that  we  take  turns  with  other  packers  in  re- 
ducing meat  prices  so  as  to  drive  out  small  competitors. 
On  careful  analysis,  the  Trade  Commission's  case  falls 
to  the  ground  through  lack  of  evidence.  In  addition  to 
this,  Swift  &  Company  absolutely  denies  that  it  ever 
makes  any  arrangements  with  other  packers  to  take  turns 
in  cutting  prices. 

The  California  Situation. 

+ 

Pages  118  The  Federal  Trade  Commission  claims  that  in  Cali- 
to  131  fornia  there  is  collusion  among  the  packers  in  the  pur- 
chase of  live  stock,  and  that  there  are  "understandings 
with  reference  to  the  prices  to  be  paid"  (page  119  of  the 
Report) ;  and  also  that  there  is  collusion  in  the  sale  of 
meat  products,  particularly  through  the  device  of  division 
of  territory.  Although  much  correspondence  is  intro- 
duced in  support  of  these  charges,  it  will  be  shown  below 


that  a  careful  analysis  discloses  no  evidence  of  agree- 
ments to  control  prices,  and  that  there  are  portions  of 
this  correspondence  which  clearly  indicate  the  existence 
of  active  competition. 

It  should  be  understood  that  in  California  the 
method  of  purchasing  live  stock  is  different  from  that 
used  east  of  the  Rockies.  The  packers  purchase  most  of 
their  animals  by  sending  buyers  out  to  the  ranches,  and 
by  negotiating  direct  with  the  owners ;  there  are  no  public 
stock  yards  to  which  animals  are  consigned  in  the  care 
of  commission  men.  There  is,  therefore,  no  open  market 
place  where  live-stock  values  can  be  reported  from  day 
to  day,  with  the  result  that  there  is  no  such  authentic  and 
wide-spread  market  information  available  as  there  is  in 
the  organized  live-stock  markets  of  the  Middle  West. 
This  lack  of  authentic  market  information  has  to  be 
overcome  to  a  certain  extent  by  exchange  of  information 
among  the  packers  by  means  of  private  correspondence. 
This  system  of  keeping  posted  on  the  market  has  its  dis- 
advantages and  is  far  inferior  to  the  system  of  price 
reporting  in  eastern  markets,  where  outside  market  re- 
porters can  observe  the  prices  that  are  being  paid,  as 
well  as  the  receipts  of  live  stock ;  and  yet,  in  the  absence 
of  any  such  open  price-reporting  system,  the  interchange 
of  information  among  the  packers  in  the  West  yields 
some  benefit  in  steadying  prices,  in  stabilizing  the  re- 
ceipts at  the  different  markets,  and  in  making  it  possible 
for  the  buyers  of  the  different  packers  to  estimate  future 
needs  and  future  supplies. 

On  pages  119  and  120  of  the  Report  the  Trade  Com- 
mission introduces  letters  which  show  that  the  various 
packers  exchange  information  as  to  the  receipts  of  live 
stock,  and  that  the  Union  Meat  Company  of  Portland, 


73 

and  the  Western  Meat  Company  of  San  Francisco,  ex- 
change weekly  data  on  live-stock  purchases  and  prices. 

An  analysis  of  these  letters  shows  that  the  informa- 
tion given  is  merely  a  record  of  past  occurrences  and 
transactions,  and  that  there  is  nothing  in  them  which 
even  suggests  an  agreement  as  to  prices  to  be  paid  or 
as  to  division  of  receipts  in  the  future.  Such  interchange 
of  information  is  analogous  to  the  methods  employed  by 
open-price  associations,  as  described  on  page  28  of  this 
document.  We  believe  that  it  is  beneficial  to  both  the 
packing  and  live-stock  industries  in  California  for  the 
packers  to  have  such  information,  and  we  can  see  no 
reason  why  this  practice  should  be  discontinued. 

In  the  exchange  of  letters  between  the  Western  Meat 
Co.  and  the  Cudahy  Packing  Co.  in  June,  1915  (pages  120 
and  121  of  the  Report),  the  phrase, — "so  we  can  work  in 
harmony  with  you  with  a  view  of  getting  prices  down  to 
where  they  really  belong"-— (top  of  page  121  of  the  Re- 
port) seems  at  first  blush  to  contain  a  suggestion  of  col- 
lusion in  fixing  prices.  A  careful  reading  of  the  other 
parts  of  the  letter,  together  with  the  reply  from  the 
Western  Meat  Co.,  shows  that  the  suggested  harmony 
was  with  regard  to  the  question  as  to  whether  heavy  hogs 
should  be  purchased  in  Idaho  at  $1.00  or  at  50  cents 
under  "the  regular  weights."  That  is  to  say,  the  ques- 
tion concerned  the  differential  between  the  price  paid  in 
Idaho  and  the  basic  San  Francisco  price.  The  Western 
Meat  Co.  replied  that  it  "could  not  very  well  buy  the 
heavy  weights  less  than  |c  lower,"  and  said  that  it  was 
buying  hogs  in  Idaho,  not  from  the  raisers  themselves, 
but  from  shippers  who  did  not  tell  the  Western  Meat 
Co.  what  the  hogs  were  costing  them.  The  Western 
Meat  Co.  did  not  agree  to  work  in  harmony  even  with 
respect  to  what  the  Idaho  differential  on  heavy  hogs 


74 

should  be,  and  there  is  absolutely  no  evidence  in  these 
letters  that  there  was  any  agreement  with  respect  to  the 
prices  themselves. 

Again,  at  the  top  of  page  122  of  the  Report,  it  appears 
as  though  there  may  be  collusion  in  the  division  of  cattle 
between  the  Western  Meat  Co.  and  the  Cudahy  Packing 
Co.  The  Western  Meat  Co.  refers  to  the  cattle  owned  by 
"Mr.  Fuller,"  discusses  the  probable  value  of  these  cat- 
tle, and  suggests  that  if  Cudahy  does  not  need  them,  the 
Western  Meat  Co.  "  could  probably  use  some  of  them 
very  nicely. " 

The  explanation  of  this  matter  is  that  it  has  been  gen- 
erally understood  for  a  number  of  years  that  Mr.  Fuller 
has  been  working  closely  with  Mr.  Cudahy,  and  that,  in 
fact,  Cudahy  has  helped  to  finance  the  operations  of  Mr. 
Fuller,  and  that  Cudahy,  therefore,  had  the  preference  on 
all  his  cattle.  The  Western  Meat  Co.  knew  that  there 
would  be  no  chance  to  purchase  the  Fuller  cattle  unless 
the  Cudahy  Packing  Co.  did  not  want  them.  We  can  see 
no  harm  in  such  a  suggestion  on  the  part  of  the  Western 
Meat  Co.,  under  these  circumstances. 

In  the  same  letter,  the  Western  Meat  Co.  asked  if  the 
"Oxnard  cattle "  had  been  sold.  The  Western  Meat  Co. 
merely  asked  for  this  information  because  it  could  not 
have  buyers  everywhere,  in  order  to  keep  posted  on  the 
situation. 

The  references  to  prices  in  these  letters  are  merely 
exchanges  of  opinions,  and  in  no  way  constitute  an  agree- 
ment as  to  what  prices  shall  be.  It  should  be  especially 
noted  that  at  the  top  of  page  122  of  the  Report  the  West- 
ern Meat 'Co.  says  that  "  whether  they  (prices)  go  lower 
or  not  will  depend  entirely  on  how  many  are  offered,  as 
the  demand  for  beef  is  less  than  last  year  regardless  of 


75 

the  Exposition."  This  clearly  indicates  that  the  price 
is  a  competitive  one,  based  on  conditions  of  supply  and 
demand. 

In  the  three  letters  on  pages  123  and  124  of  the  Report 
there  is  nothing  but  an  interchange  of  information  as  to 
transactions  that  had  been  carried  out  and  of  opinion 
as  to  future  prices.  Attention  is  called  to  the  statement 
of  the  Western  Meat  Co.  near  the  top  of  page  124  of 
the  Report,  that  uwe  are  able  for  the  first  time  in  several 
months  to  show  a  small  favorable  margin  on  beef."  This 
statement  shows  that  there  could  have  been  no  control  of 
prices,  and  that  the  packers  had  paid  for  cattle  all  that 
they  were  worth,  and  even  a  little  more  than  they  were 
w,orth  in  the  form  of  dressed  meat  and  by-products.  If 
the  Trade  Commission  could  offer  one  single  instance 
where  the  prices  had  been  manipulated,  either  up  or 
down,  or  where  prices  were  controlled  so  as  to  yield  the 
packers  inordinate  profits,  there  would  be  more  founda- 
tion for  its  accusations. 

The  letter  on  page  125  of  the  Report  was  written  by 
a  representative  of  one  of  the  small  packing  concerns,  in 
which  none  of  the  five  large  packers  is  interested.  This 
letter  asks  if  it  would  not  be  possible  to  agree  to  buy  hogs 
"on  a  delivered  basis."  This  is  merely  a  suggestion  that 
the  packers  adopt  a  uniform  method  of  quoting  prices, 
and  does  not  suggest  the  fixing  of  the  prices  themselves. 
Xear  the  end  of  this  letter,  however,  there  is  a  sugges- 
tion that  a  definite  price  be  arranged,  but  we  call  atten- 
tion to  the  Western  Meat  Co.'s  letter,  signed  F.  L.  W., 
at  the  top  of  page  126  of  the  Report,  in  which  it  is  de- 
clared : 

"As  far  as  having  any  understanding  on  the  price  that  is  to  be 
paid  for  hogs,  we  would  not  care  to  be  restricted  in  this  manner, 
as  besides  being  contrary  to  the  spirit  of  the  time,  there  is  always 
the  possibility  that  it  might  make  bad  friends." 


76 

In  other  words,  the  only  suggestion  contained  in  all 
this  correspondence  of  anything  like  an  agreement  affect- 
ing prices  was  promptly  turned  down  by  the  Company  in 
which  members  of  the  Swift  family  own  stock.  Further- 
more, there  is  no  evidence  that  this  suggestion  was  ever 
carried  out  among  the  other  packers  involved.  The  let- 
ter quoted  above  was  written  before  the  Federal  Trade 
Commission  had  begun  its  investigation  of  the  affairs 
of  the  Western  Meat  Co. 

In  commenting  on  the  correspondence  presented  on 
pages  127, 128,  and  129  of  the  Eeport,  the  Trade  Commis- 
sion alleges  that  there  is  evidence  of  an  understanding 
that  there  shall  be  no  price  cutting,  and  that  each  packer 
shall  respect  the  sales  territory  of  the  other.  The  letter 
at  the  top  of  page  127  of  the  Report  contains  a  complaint 
from  the  representative  of  the  Western  Meat  Co.  that 
another  packer  is  selling  at  extremely  low  prices,  but  he 
specifically  says :  * 1 I,  of  course,  have  no  suggestions  to 
make  as  to  what  prices  your  people  should  get."  The 
reply  at  the  bottom  of  page  127  of  the  Report  indicates  a 
willingness  to  refrain  from  cutting  prices,  and  asks  for 
the  Western  Meat  Co.  's  price  list.  Nothing  in  this  letter 
can  be  construed  to  mean  that  there  was  agreement  to 
secure  the  same  prices  that  were  being  charged  by  the' 
Western  Meat  Co.  Anybody  is  welcome  to  the  Western 
Meat  Co.'s  price  list,  and  it  is  sent  freely  to  competitors 
as  well  as  to  dealers. 

The  Western  Meat  Co.  has  apparently  felt  that  it  is 
overstepping  neither  the  spirit  nor  the  letter  of  the  law 
when  it  has  complained  that  a  competitor  is  unnecessarily 
cutting  prices,  especially  when  such  price  cutting  is  sub- 
versive of  sound  business  conditions  in  a  territory  where 
over-competition  has  been"  more  or  less  disastrous  to  all 
concerned.  At  any  rate,  such  complaints  as  are  found  in 


77 

these  letters  are  accompanied  by  no  evidence  that  any 
agreements  resulted,  and  as  a  matter  of  fact  the  West- 
ern Meat  Co.  has  carefully  refrained  from  having  such 
agreements,  either  as  to  prices  or  as  to  division  of  ter- 
ritory. 

In  the  letter  at  the  bottom  of  page  127  of  the  Report, 
the  Pacific  Coast  Beef  and  Provision  Co.  complains  of  a 
report  that  the  Western  Meat  Co.  of  San  Francisco  is 
going  to  ship  beef  to  Los  Angeles,  and  in  the  reply  on 
page  128  of  the  Report,  the  Western  Meat  Co.  replies 
that  it  is  looking  for  no  "  extra  places  to  lose  money  on 
fresh  meats,"  and  explains  that  practically  nothing  has 
been  sold  in  Los  Angeles.  This  letter  also  asks  whether 
Cudahy  is » go  ing  to  "put  in  fresh  meats  at  their  new 
branch  house  (at  Fresno),  as  this  might  make  considera- 
ble difference  in  regard  to  our  policy  of  keeping  out  of 
Los  Angeles."  This  might  appear  as  though  the  West- 
ern Meat  Co.  had  some  agreement  to  keep  out  of 
Los  Angeles.  The  fact  is  that  the  Western  Meat  Co.  has 
always  shipped  intermittently  to  Los  Angeles  when  there 
was  any  money  in  this  business,  and  that  it  never  agreed 
not  to  do  so.  The  quotation  given  above  shows  that  the 
Western  Meat  Co.  did  not  know  of  Cudahy 's  plans  and 
that  information  was  merely  being  sought.  This  in 
itself  indicates  lack  of  agreement  to  divide  territory.  The 
reference  to  "keeping  out  of  Los  Angeles"  implies  no 
agreement  to  do  so,  and  in  fact  indicates  the  Western 
Meat  Go's,  intention  to  sell  goods  in  Los  Angeles  when- 
ever it  so  desires. 

The  letter  from  the  Cudahy  Packing  Co.  to  the  Western 
Meat  Co.,  reproduced  on  page  130  of  the  Report,  is  sup- 
posed to  contain  evidence  that  there  must  be  a  division 
of  territory,  because  Cudahy,  located  in  Los  Angeles,  had 
declined  an  order  for  ribs  and  loins  in  San  Francisco. 


78 

not  caring  to  go  "beyond  the  limits  of  our  own  terri- 
tory." As  a  matter  of  fact,  it  rarely  pays  a  Los  Angeles 
packer  to  ship  fresh  meat  to  San  Francisco,  because  of 
the  freight  rate  that  has  to  be  paid,  and  Cudahy  volun- 
tarily gave  information  to  the  effect  that  he  did  not  care 
to  ship  goods  to  San  Francisco,  even  though  he  had  just 
received  "an  inquiry ";  the  reference  to  "our  own  ter- 
ritory "  means  merely  the  usual  or  customary  territory, 
as  limited  by  freight  rates,  that  is  served  from  Los 
Angeles,  and  does  not  refer  to  any  agreed  division  of 
territory. 

In  the  letter  at  the  top  of  page  131  of  the  Report  the 
representative  of  the  Western  Meat  Co.  at  Fresno,  Cal- 
ifornia, complains  to  the  San  Francisco  office  of  that 
company  that  the  Los  Angeles  branch  of  Swift  &  Com- 
pany has  been  selling  to  the  Terra  Bella  Mercantile  Co., 
of  Terra  Bella,  and  asks  when  Swift  &  Company  was  ac- 
corded permission  to  do  so.  This  can  refer  to  nothing 
but  the  division  of  territory  that  is  made  between  the 
branch  houses  of  Swift  &  Company  in  San  Francisco  and 
Los  Angeles.  These  two  selling  houses  representing  the 
same  company  must  necessarily  have  an  agreement  as 
to  just  which  territory  each  shall  cover.  The  Western 
Meat  Company's  agent  apparently  had  his  hands  full 
because  of  competition  from  the  San  Francisco  branch 
house  of  Swift  &  Company,  and  naturally  felt  incensed 
when  he  found  he  had  the  Swift  &  Company  Los  Angeles 
house  also  to  contend  with  in  this  particular  locality. 
It  was  perhaps  his  idea  that  the  Western  Meat  Co. 
might  have  influence  with  Swift  &  Company  to  prevent 
competition  from  the  Los  Angeles  branch.  The  West- 
ern Meat  Co.  did  not  feel  that  it  had  such  influence,  as 
is  evidenced  by  the  following  reply  to  the  letter  under 


79 

discussion,  copy  of  which  was  taken  by  the  Federal  Trade 
Commission,  but  which  was  not  reproduced  in  its  report : 

Jan.  22,  1915. 
Mr.   G.   A.   Karr, 
Fresno,  Cal. 
Dear  Sir: 

Replying  to  yours  of  the  20th  inst.,  with  reference  to  Swift  & 
Company,  Los  Angeles,  selling  Terra  Bella  Merc.  Co.,  at  Terra 
Bella. 

It  would  not  be  expedient  for  us  to  engage  in  a  controversy  with 
them  over  selling  in  this  town  and  consequently  will  not  take  up 
with  them  about  it.  We  are  sure  that  our  prices  compare  favorably 
with  those  quoted  by  Swift  &  Company  and  you  need  have  no  fear 
of  their  prices  being  lower  than  your  own. 
Yours  respectfully, 

WESTERN  MEAT  COMPANY. 

Provision  Dept.  Per 

WH-SS 

In  concluding  our  discussion  of  the  California  situa- 
tion, we  also  wish  to  reproduce  another  letter  written  by 
the  President  of  the  Western  Meat  Company  to  sub- 
managers  on  September  4th,  1917,  copy  of  which,  in  sub- 
stantially the  same  language,  was  sent  to  all  the  branch- 
house  managers  of  that  company.  Although  this  let- 
ter was  written  shortly  after  the  Food  Control  law  was 
passed,  and  while  the  Federal  Trade  Commission  inves- 
tigation was  in  progress,  it  is  worthy  of  note  that  sim- 
ilar letters  of  instructions  have  always  been  sent  out  at 
irregular  intervals  in  order  to  show  the  policy  of  the 
company,  and  in  order  to  keep  all  managers  from  de- 
parting from  this  policy.  Copy  of  this  was  taken 
from  the  files  of  the  Western  Meat  Co.  by  the  Fed- 
eral Trade  Commission,  but  it  -was  not  reproduced 

in  the  Report: 

Sept.  4.  1917. 
Mr.  M.  D.  Gallagher, 
Mr.  E.  R.  Patterson. 
Mr.  W.  Haaker, 
Mr.  E.  G.  Evens, 
Gentlemen: 

I  write  to  caution  you  against  having  any  understanding  as 
regards  buying  or  selling  with  any  of  our  competitors,  either  in  the 
fresh  meat,  produce,  provision  or  inedible  lines.  It  has  always  been 
our  policy  to  work  on  these  lines,  and  I  am  merely  calling  your 


80 

attention  to  this  fact,  so  that  the  policy  of  the  company  will  be'  fully 
confirmed  in  your  minds. 

A  new  food  production  bill  provides  for  prison  sentences  of  from 
two  to  five  years  for  offenses  of  this  nature,  which  are  particularly 
aggravating  in  war  times,  and   furthermore,   heavy  fines   can   be 
levied  in  addition  to  the  prison  sentences. 
Kindly  acknowledge  receipt. 

Yours  respectfully, 

F.  L.  WASHBURN. 

Swift  &  Company  fails  to  find  evidence  in  this  Califor- 
nia correspondence  of  any  illegal  or  uncommercial  collu- 
sion among  the  packers  in  California  with  regard  to 
the  fixing  of  prices  or  the  division  of  territory.  On  the 
other  hand,  we  have  shown  that  even  in  the  correspond- 
ence reproduced  by  the  Trade  Commission  there  are  pos- 
itive evidences  of  the  real  competition  that  exists;  and 
we  have  also  shown  that  interchange  of  opinion  as  to 
prices  and  receipts  is  necessary  because  of  the  absence 
of  open  public  market  places  and  the  current  market  in- 
formation that  is  available  when  there  are  such  market 
places. 


81 


ALLEGED  AGREEMENTS  IN  OTHER  LINES. 

Pages  132  ^he  Trade  Commission  claims  that  it  has  evidence 
to  158  Of  an  agreement  among  the  large  packers  to  fix  the  price 
of  lard  substitute,  that  there  is  division  of  territory  and 
joint  manipulation  of  prices  in  the  purchase  of  cheese, 
that  there  are  similar  agreements  in  the  purchase  of  but- 
ter, cream,  •  poultry,  and  eggs,  and  that  there  are  also 
"collusive  and  unfair  practices"  in  the  rendering  busi- 
ness. 

There  is  perhaps  no  part  of  the  Trade  Commission's 
report  which  is  so  replete  with  misconstruction  of  facts 
or  where  there  are  such  glaring  instances  of  suppression 
of  correspondence  taken  from  our  files  and  of  other  data 
which  show  the  baselessness  of  the  Commission's  conten- 
tions. 

The    Real    Facts   About   Alleged   Lard    Compound 

Agreement. 

Pages  132  ^\s  evidence  of  an  agreement  to  fix  the  price  of  lard 
to  134  compound  the  Federal  Trade  Commission  introduces 
letters  passed  between  representatives  of  Armour  &  Com- 
pany relative  to  the  situation  at  Pittsburgh,  Pennsylva- 
nia. These  letters  refer  to  the  fact  that  the  price  charged 
by  all  competitors  on  this  product  has  been  the  same 
"since  Jan.  14th"  (top  of  page  133  of  the  Report),  and 
that  in  another  place  it  is  said  ' i  Everybody 's  price  must 
be  the  same  as  your's"  (page  133).  The  last  letter  on 
this  subject  (top  of  page  134),  after  referring  to  "com- 
petitors '  prices  being  identical, ' '  ends  with  the  remark : 
"Also,  you  might  destroy  this  letter  on  the  subject." 
On  their  face  these  letters  look  rather  damaging,  and 


82 

without  any  further  explanation,  which  the  Trade  Com- 
mission does  not  give,  they  certainly  seem  to  indicate 
that  there  had  been  an  agreement  to  fix  prices.  Whether 
the  Trade  Commission  had  the  facts  or  not  we  do  not 
know;  at  any  rate,  the  Commission  could  have  had  the 
proper  explanation  if  it  had  not  been  so  intent  on  mak- 
ing out  a  case  against  the  packers  by  presenting  only 
one  side. 

The  truth  about  this  matter  is  as  follows : 

These  letters  were  written  beginning  with  January 
24th,  1918.  The  United  States  Food  Administration  had 
begun  to  exercise  its  control  over  food  matters  during 
the  previous  fall,  and  one  of  the  first  commodities  over 
which  it  exercised  its  authority  was  cotton-seed  oil,  out 
of  which  lard  compound  is  made.  The  manufacturers  of 
these  commodities  were  brought  together  at  the  request 
of  the  Food  Administration  in  order  to  stabilize  the 
price  of  cotton-seed  oil;  a  definite  price  was  agreed  on 
as  well  as  a  differential  over  the  price  of  oil  which  should 
apply  to  lard  compound.  In  other  words,  the  fixed  price 
of  lard  compound,  of  -which  the  Trade  Commission 
complains,  was  determined  at  the  request  of,  and 
in  co-operation  with,  the  Government  itself.  This 
fact  is  not  mentioned  by  the  Federal  Trade  Com- 
mission in  its  report. 

The  Trade  Commission  places  considerable  importance 
on  the  fact  that  one  of  these  letters  contains  the  phrase— 
"You  might  destroy  this  letter  on  the  subject."  Al- 
though Swift  &  Company,  of  course,  does  not  know  just 
why  an  Armour  official  should  have  issued  such  instruc- 
tions, we  should  naturally  guess  that  it  was  because  the 
Armour  man  was  afraid  that  the  letter  might  be  seized 
by  the  examiners  of  the  Federal  Trade  Commission  and 


83 

used  in  an  unfair  and  misleading  way.  If  this  was  the 
motive  of  the  Armour  official,  subsequent  events  certainly 
proved  that  his  fear  was  not  without  foundation. 

Further  details  about  the  negotiations  between  the 
Food  Administration  and  the  manufacturers  of  lard  com- 
pound and  cotton-seed  oil,  together  with  the  resulting  in- 
structions as  issued  by  the  Food  Administration,  may  be 
found  in  the  testimony  of  Mr.  J.  Ogden  Armour  before 
the  House  Committee  on  Interstate  and  Foreign  Com- 
merce, Jan.  21,  1919.- 

Alleged  Collusion  in  Cheese  Business. 

Pages  134  Xone  of  the  correspondence  introduced  by  the  Fed- 
to  144  era}  Trade  Commission  on  this  subject  was  taken  from 
the  files  of  Swift  &  Company,  and  this  Company  is  not 
concerned  to  any  great  extent.  It  is  true  that  the  large 
packers  together  handle  a  considerable  proportion  of 
the  cheese  business  of  the  United  States,  but  the  figures 
presented  by  the  Federal  Trade  Commission  on  page  134 
of  the  Report  exaggerate  their  "dominant  position"  in 
the  cheese  market  of  the  nation.  The  total  production  of 
Cheese  in  1918  appears  to  have  been  about  420,000,000 
pounds  (Standard  Farm  Paper  Year  Book  1918-1919), 
and  according  to  estimates  furnished  us  by  the  Bureau 
of  Markets,  United  States  Department  of  Agriculture, 
about  92  per  cent,  of  this  entered  trade  channels.  This 
means  that  about  385,000,000  pounds  of  cheese  were 
traded  in  during  1918.  Swift  &  Company  handled  less 
than  one-sixth  of  this  total. 

At  the  top  of  page  135  of  the  Report,  the  firm  of  Pauly 
&  Pauly  is  listed  as  a  " packer-controlled"  firm,  because 
this  firm  sells  80  per  cent,  of  its  output  to  Swift  &  Com- 
pany. It  is  true  that  we  buy  very  heavily  of  this  concern, 


84 

with  whom  we  have  had  very  satisfactory  relations ;  but 
it  is  not  true  in  any  sense  that  this  firm  is  controlled  by 
Swift  &  Company.  The  alleged  control  of  this  firm  is  made 
use  of  by  the  Federal  Trade  Commission  in  an  attempt 
to  show  collusion  between  Armour  &  Company  and  Swift 
&  Company,  by  introducing  into  the  reproduction  of  a 
letter  from  Armour  &  Company's  files  (bottom  of  page 
135  of  the  Report),  a  parenthetical  remark  which  was  not 
in  the  original  letter.  This  point  is  mentioned  merely  as 
an  illustration  of  the  methods  used  by  the  Trade  Com- 
mission to  imply  collusion.  Such  implications  have  the 
force  and  effect  of  absolute  assertions  in  the  minds  of 
many  readers  of  Government  documents. 

In  connection  with  this  cKeese  business,  Swift  &  Com- 
pany also  wishes  to  state  that  we  buy  over  90  per  cent, 
of  our  Wisconsin  cheese  purchases  from  wholesale  deal- 
ers, in  whom  we  have  no  financial  interest,  and  that  we 
buy  the  remainder  direct  from  cheese  factories,  none  of 
which  we  own.  We  buy  no  cheese  on  the  cheese  boards  in 
that  state.  We  have  never  tried  to  affect  the  quotations 
on  the  cheese  boards,  and  we  have  no  agreements  or  con- 
spiracies with  other  packers  or  dealers  to  affect  cheese 
quotations  or  to  divide  territory  in  any  way  whatsoever. 

Alleged  Agreements  in  Creamery  and  Butter  In- 
dustry. 

Pages  144  The  Federal  Trade  Commission  claims  that  there  is  a 
to  154  division  of  territory  among  the  big  packers  in  the  buy- 
ing of  cream,  which  is  used  for  making  butter,  and  that 
there  are  price  agreements  among  the  local  buyers  and 
agents  of  the  packers  who  gather  cream  at  country  points 
for  shipment  to  our  butter  factories. 

In  support  of  the  first  claim,  the  Trade  Commission 


85 

says  that  out  of  1,561  creameries,  condensaries,  and  cream 
stations,  reported  to  the  Commission,  1,262  belong  to 
Page  145 Swift  and  293  to  Armour,  and  that  "there  are  only  29 
towns  where  cream  buying  stations  of  two  or  more  packer 
groups  are  located."  This  is  supposed  to  imply  a  division 
of  territory. 

In  the  first  place  it  should  be  noted  that  the  number 
of  Armour  cream-buying  stations  is  very  small  as  com- 
pared with  the  number  of  Swift  stations.  These  cream- 
buying  stations  are  located  principally  at  small  country 
points,  and  there  are  tens  of  thousands  of  such  points 
where  the  packers  might  have  representatives  to  buy 
cream.  It  is  only  natural  that  in  developing  a  system 
of  cream-buying  stations,  one  packer  should  prefer  not  to 
establish  a  buying  agency  at  the  same  shipping  point 
where  another  packer  has  already  become  established, 
especially  when  there  are  so  many  thousands  of  places 
that  may  be  selected.  That  Swift  and  Armour  are  both 
represented  in  only  29  towns,  especially  when  Armour  is 
located  at  only  293  places  in  all,  cannot  possibly  be  con- 
sidered evidence  that  there  is  an  agreement  to  divide 
territory. 

Furthermore,  Swift  and  Company's  method  of  as- 
'  sembling  produce  is  substantially  different  from  that  em- 
ployed by  the  other  packers.  We  rely  largely  on  our 
own  country  plants,  which  collect,  prepare,  and  ship  these 
products ;  the  other  packers  buy  more  heavily  from  other 
dealers.  This  in  itself  indicates  that  it  would  be  prac- 
tically impossible  to  divide  territory;  and  as  a  matter 
of  fact,  Swift  and  Company  has  no  agreement  with  other 
packers  for  this  purpose. 

As  for  the  question  of  agreement  among  local  cream 
buyers,  this  matter  requires  preliminary  explanation 


86 

before  the  correspondence  introduced  by  the  Trade  Com 
mission  can  be  properly  understood.  In  obtaining  cream 
at  country  points,  Swift  &  Company  employs  agents  who 
assemble  the  cream  brought  in  by  surrounding  farmers 
and  ship  it  to  Swift  &  Company,  receiving  a  commission 
for  their  services.  These  agents  are  men  who  are  gen- 
erally in  other  lines  of  business.  They  are  often  pro 
prietors  of  local  stores,  or  they  may  be  cash  buyers  of 
poultry  and  eggs  on  their  own  account,  who  are  acting 
as  agents  for  Swift  &  Company  only  in  the  purchase  of 
cream  on  a  commission  basis. 

In  many  cases  there  are  two  or  more  such  cream  buyers 
in  a  single  town,  and  there  are  also  cream  buyers  at  ship- 
ping points  within  a  radius  of  ten  or  fifteen  miles,  to  any 
of  which  the  farmers  may  haul  their  cream,  depending  on 
the  prices  offered  by  these  different  cream  buyers. 

It  is  perfectly  obvious  that  the  prices  paid  by  compet- 
ing cream  buyers  in  the  same  town  or  in  the  same  general 
locality  must  be  substantially,  if  not  exactly,  the  same; 
otherwise,  the  buyer  who  offers,  say  1  cent  less  per  pound 
for  butter  fat,  will  get  no  business,  and  he  has  to  fall 
in  line  with  his  competitors  in  order  to  hold  his'  trade. 
On  the  other  hand,  if  his  price  is  too  high,  he  gets  the 
business,  but  loses  money  on  it.  Because  of  this  situa- 
tion, it  has  always  been  very  common  for  competing 
cream  buyers  to  keep  themselves  informed  as  to  the  prices 
their  competitors  are  paying. 

This  was  the  situation  which  confronted  Swift  &  Com 
pany  when  it  entered  the  business,  and  is  the  situation  it 
has  had  to  contend  with  in  the  development  of  local  cream- 
buying  stations.  We  have  employed  agents  who  are  rep- 
resentatives of  Swift  &  Company  only  in  the  sense  that 
they  receive  a  commission  for  such  cream  as  they  gather 


87 

and  ship  to  us;  they  have  always  been  in  the  habit  of 
keeping  themselves  posted. as  to  prices  paid  for  cream 
by  other  buyers  in  the  same  town  or  nearby  towns; 
and  in  the  very  nature  of  the  case,  the  prices  offer- 
ed by  these  local  cream  buyers  must  be,  and  neces- 
sarily will  be,  substantially  identical,  even  though  the 
buyers  are  severe  and  jealous  competitors  of  each  other. 
One  other  complicated  feature  of  the  situation  is  that 
some  states  have  "anti-discrimination  laws/'  which  pro- 
hibit one  company  from  paying  different  prices  for  cream 
or  other  products  at  different  points  within  the  state, 
except  as  differences  are  justified  or  made  necessary  by 
differences  in  transportation  rates.  The  object  of  such 
legislation  is  to  prevent  price  cutting  in  single  localities 
for  the  purpose  of  driving  competitors  out  of  business. 

We  have  therefore  been  up  against  the  problem  of 
preventing  price  agreements  in  localities  where  prices 
are  bound  to  be  practically  the  same,  even  if  there  is  no 
agreement,  and  at  the  same  time  of  preventing  differ- 
ences in  prices  in  different  localities,  as  required  by  State 
laws,  except  as  such  differences  are  justified  by  trans- 
portation rates  or  are  necessary  to  meet  competition. 

A  careful  analysis  of  the  correspondence  introduced 
(pages  147  to  154  of  the  Report)  show^s  the  difficulties  we 
have  met  in  dealing  with  this  situation,  and  shows  at  the 
same  time  the  positive  efforts  we  have  made  to  prevent 
local  price  agreements  among  our  country  cream  buyers. 
The  matter  is  written  up  in  such  a  way  by  the  Fed- 
eral Trade  Commission  as  to  imply  that  we  are  con- 
sciously having  our  agents  enter  into  agreements  with 
competitors,  and  that  we  are  trying  to  cover  up  the  mat- 
ter by  admonishing  and  instructing  our  agents  to  be  care- 
ful in  the  phraseology  of  their  correspondence.  In  this 
connection,  the  Trade  Commission  has  failed  to 


88 

reproduce  certain  letters  that  it  took  from  our 
files  which  more  clearly  define  our  real  attitude 
and  policy  than  any  of  those  which  are  actually 
reproduced  in  the  report. 

As  an  example  of  the  Trade  Commission's  unfairness 
in  this  respect,  it  failed  to  reproduce  the  following  pos- 
itive instructions  that  were  issued  to  our  representatives 
on  Feb.  15,  1915,  copy  of  which  was  available  to  the 
Commission,  and  which  shows  our  definite  attempts  to 
prevent  price  agreements.  Similar  instructions  were  is- 
sued from  time  to  time. 

No.  331 
Legal  Buying 
February  15,  1915. 
Produce  Instructions. 

1.  Managers  should  keep  in  mind  the  fact  that  buying  prices  and 

selling  prices  should  be  based  on  value,  taking  into  consid- 
eration quality,  freight  rates  and  competitive  conditions. 
Attention  is  directed  to  the  so-called  Anti-discrimination  laws 
under  which  uniform  prices  must  be  paid.  While  these  are 
construed  to  permit  variations  to  meet  legitimate  competi- 
tion, the  conditions  must  be  extreme  to  induce  Managers  to 
make  such  variations. 

2.  Managers  must  not,  under  any  circumstances,  enter  into  any 

agreements,  verbal  or  written,  restricting  competition  in  any 
manner,  or  dividing  territory  with  competitors  or  in  any  man- 
ner threatening  or  seeming  to  threaten  shippers.  Any  acts 
that  might  be  so  construed  should  be  avoided. 

3.  Anything  that  might  tend  to  affect  the  Company  from  a  legal 

standpoint,  should  be  called  to  the  attention  of  the  Produce 
and  Legal  Departments,  with  all  the  facts  that  can  be  gath- 
ered concerning  them. 

Another  evidence  of  the  unfairness  with  which  the  Trade 
Commission  handled  this  matter  is  shown  by  the  method 
in  which  general  instructions  issued  by  Mr.  L.  F.  Swift, 
ordering  compliance  with  the  old  Supreme  Court  injunc- 
tion of  1903,  are  introduced  at  the  bottom  of  page  149  of 
the  Report.  This  incident  is  explained  as  though  it  were 
a  special  precaution  taken  by  Mr.  Swift  at  the  time  of 
the  introduction  of  resolutions  in  Congress  calling  for  an 
investigation  of  the  packing  industry.  As  a  matter  of 
fact,  these  instructions,  based  on  the  1903  injunction, 


89 

have  been  issued  periodically  by  Mr.  Swift  to  all  heads 
of  departments  at  intervals  of  about  six  months  for  many 
years.  This  matter  was  explained,  and  the  instructions 
reproduced,  on  pages  11  and  12  above. 

An  attempt  is  also  made,  as  on  page  150  of  the  Report, 
to  intimate  that  auditors  have  been  employed  merely  for 
the  purpose  of  going  about  among  our  agents  in  order  to 
destroy  incriminating  evidence.  The  truth  is  that  one 
of  the  duties  of  our  traveling  auditors  has  been  to 
check  up  the  operations  and  correspondence  of  our  repre- 
sentatives in  order  to.  prevent  the  actual  occurrence  of 
collusive  practices.  This  is  clearly  shown  by  the  letters 
reproduced  at  the  bottoms  of  pages  148  and  151  of  the 
Report. 

It  is  also  significant  that  in  reproducing  the  letter  of 
March  9th,  1916,  on  page  151  of  the  Report,  the  Federal 
Trade  Commission  failed  to  reproduce  the  following  let- 
ter of  April  3rd,  which  was  written  by  the  head  of  our 
Produce  Department  to  two  sub-managers  in  the  depart- 
ment, which  again  explains  our  attitude  and  efforts,  and 
copy  of  which  was  actually  taken  from  our  files  by  the 
Federal  Trade  Commission. 

April  3,  1916. 
Messrs.  J.  Y.  Marshall 
L.  E.  Dunker 

Question  of  Making  Agreements  Other  Produce  Dealers. 

Want  you  to  take  up  especially  with  each  Manager,  assistant 
manager,  you  visit,  the  question  of  making  agreement  of  any 
character. 

You  fully  understand  our  requirements  in  this  matter.  The 
Managers  are  all  under  instructions  from  Mr.  L.  F.  Swift,  covering 
the  matter.  We  desire  you  to  further  handle  as  follows: 

Explain  to  them  clearly  that  they  have  been  thoroughly  in- 
structed in  this  matter  and  any  deviation  from  these  instructions 
will  revert  against  them  in  person. 

You  are  to  thoroughly  and  clearly  explain  to  them  that  if  for 
any  reason  they  have  a  conversation  with  other  dealers,  they  are 
not  to  make  any  statements  of  any  character  that  could  be  construed 
as  an  agreement  and  unless  this  is  fully  understood  by  them  and 
unless  this  is  followed  to  the  letter,  we  shall  find  it  necessary  to 
instruct  them  that  no  conversations  of  any  character  are  to  be  had 


90 

r 

with  any  other  dealers  that  touch  any  feature  of  the  produce  busi- 
ness. 

You  are  to  make  a  definite  memorandum  of  this  conversation  with 
each  of  these  managers,  showing  the  date  thereon  and  hold  same  in 
your  files  as  permanent  record  and  responsibility  is  placed  with  you 
to  see  that  interview  of  this  character  is  had  with  every  manager 
of  the  produce  plants  under  your  direction,  within  reasonable  time. 
HBC*R 

It  will  be  seen  that  in  this  letter  the  manager  of  our 
Produce  Department  said  that  it  might  be  necessary  to 
instruct  our  agents  not  to  hold  "conversations  of  any 
character  *  *  *  with  any  other  dealers  that  touch 
any  feature  of  the  produce  business. "  That  is  to  say,  we 
were  trying  so  definitely  to  prevent  our  agents  from 
entering  into  price  agreements  that  we  were  thinking  of 
instructing  them  to  not  even  talk  with  other  dealers  about 
the  produce  business.  Again,  on  page  147  of  the  Re- 
port, the  Trade  Commission  introduces  a  letter  written  to 
Mr.  H.  B.  Collins  on  September  10,  1915,  but  fails  to 
reproduce  the  reply  written  by  Mr.  Collins  on  September 
20,  copy  of  which  was  taken  from  our  files  by  the  Federal 
Trade  Commission  and  which  clearly  explains  our  atti- 
tude: 

Sept.  20,  1915. 
Mr.  R.  C.  McManus, 
Legal  Dept. 

Answering  your  letter  of  Sept.  10th: 

I  may  be  mistaken,  but  I  do  not  believe  there  is  anything  about 
these  letters  that  proves  clearly  illegal. 

Considering  the  number  of  agents  we  have,  unless  we  say  to  them 
they  are  not  under  any  circumstances  to  have  conversation  of  any 
character  with  their  competitors,  there  will  be  more  or  less  com- 
munications reaching  our  creameries  from  these  agents. 

What  do  you  think  of  instructing  managers,  as  well  as  our  trav- 
eling representatives,  that  where  they  receive  a  communication, 
either  by  telephone  or  by  letter,  from  an  agent,  which  shows  any 
.  trace  of  getting  together,  or  making  agreement  with,  a  competitor, 
that  they  are  to  be  written  a  clear  letter,  specifically  mentioning 
the  communication,  stating  to  them  that  under  no  circumstances 
are  they  to  make  an  agreement,  and  that  they  are  making  them- 
selves criminally  liable  by  so  doing. 

Believe  this  would  have  the  effect — 

1st — Of  stopping  possibility  of  their  making  agreement. 

2nd — It  would  make  our  records  clear. 

Awaiting  your  reply. 
Produce  Dept. 
HBC  EJH  Desk  A. 


91 

Finally  attention  is  called  to  the  letter  of  September  1, 
]916,  page  153  of  the  Report,  which  shows  that  because  of 
the  difficulties  we  were  having  in  preventing  our  cream 
agents  from  entering  into  local  agreements,  in  spite  of 
positive  efforts  we  had  been  making  in  that  direction, 
we  thought  of  actually  doing  away  with  cream  agents  in 
Missouri,  where  we  were  having  the  most  trouble,  and 
also  of  carrying  out  a  similar  policy  in  other  states  if  it 
worked  out  satisfactorily  in  Missouri. 

In  conclusion,  it  is  obvious  from  the  foregoing  dis- 
cussion that  the  Federal  Trade  Commission  not  only 
misrepresented  the  facts  writh  regard  to  the  cream- 
buying  situation  at  country  points,  but  that  it  also 
actually  suppressed  pertinent  and  relevant  corre- 
spondence which  it  took  from  our  files.  The  insinuation, 
which  carries  the  weight  of  positive  assertion  in  the 
minds  of  those  who  do  not  understand  the  matter,  is  that 
Swift  &  Company  was  sanctioning  local  price  agreements, 
whereas  a  true  interpretation  of  the  correspondence  re- 
produce'd  in  the  Commission's  report,  and  especially  of 
the  correspondence  which  the  Trade  Commission  failed 
to  reproduce,  shows  that  Swift  &•  Company  was  doing  its 
best  to  prevent  illegal  price  agreements.  Swift  &  Com- 
pany doubts  if  any  other  concern  has  made  such  definite 
effort*  to  cope  with  this  difficult  situation. 


92 


Alleged  Division  of  Territory  in  Poultry,  Egg,  and 
Butter  Buying. 

Pages  154     jn  introducing  its  discussion  of  this  subject,  the  Fed- 

to  156   era}  Trade  Commission  says  that  in  1917  the  five  large 

packers  "had  a  control  estimated  in  the  trade  to  be  over 

65  per  cent,  of  the  dressed  poultry  and  eggs  shipped  in 

the  United  States  and  are  also  large  shippers  of  butter." 

If  the  Trade  Commission  wished  to  show  what  per- 
centage of  the  trade  in  these  products  is  handled  by  the 
five  large  packers,  it  should  have  been  more  accurate  in 
the  presentation  of  figures.  In  the  first  place,  it  should 
not  have  gone  to  "the  trade "  for  an  estimate,  because 
substantially  accurate  data  were  available.  Estimates  in 
the  trade  are  particularly  unreliable,  especially  as  many 
dealers  are  prejudiced  against  the  large  packers  who 
are  their  principal  competitors,  and  who  naturally  have 
an  exaggerated  notion  of  the  part  played  by  the  large 
packers.  To  give  the  impression  that  the  packers  con- 
trol over  65  per  cent,  of  the  trade  in  poultry  and  eggs 
is  absolutely  misleading.  In  the  first  place,  they  do  not 
together  u control"  any  part  of  the  trade,  because  they 
are  in  keen  competition  with  each  other;  and  second,  be- 
cause even  if  they  did  work  together,  they  would  handle 
nothing  like  65  per  cent,  of  the  total. 

The  following  table  shows  the  total  production  of 
poultry,  eggs,  and  butter  in  the  United  States  in  1918, 
according  to  the  latest  reports  of  the  United  States  De- 
partment of  Agriculture;  the  proportion  entering  trade 
channels,  as  estimated  by  the  Bureau  of  Markets  of  the 
same  government  department ;  the  volume  handled  by 
Swift  &  Company,  the  largest  dealer  in  these  products; 
and  tjie  proportions  of  total  production  and  of  total 
amount  entering  trade  channels  handled  by  Swift  £  Com- 
pany: 


93 


PROPORTION   OF    POULTRY,   EGGS,  AND   BUTTER    HANDLED   BY 
SWIFT   &   COMPANY,   1918. 

(000  omitted.) 


Com- 
modity 

Total 
Production 
U.  S. 

Amount  Entering 
Trade  Channels 

Handled  b> 

Swift  &  Company 

Quantity 

Per  Cent 
Total  Pro- 
duction 

Per  Cent 
Total 
Entering 
Trade 
Channels 

Per  Cent 
(a) 

Quantity 

Poultry 

589,000  head  (b) 
1,767,000  Ibs.     (c) 

75.0% 

1,325,250  Ibs. 

79,000  Ibs. 

4.5% 

6.0% 

Egg* 

1,921,000  doz.   (b) 
2,881,500  Ibs.     (d) 

75.0% 

1,440,750  doz. 
2,161,125  Ibs. 

91,620  doz. 
137,000  Ibs. 

4-8% 

6.3% 

Butter  (el 

1,475,000  Ibs.     (f) 

71.3%  (ft) 

1,051,250  Ibs. 

61,600  Ibs. 

4.2% 

5.9% 

(a)      Percentages  estimated  by  Bureau  of  Markets,  U.  S.  Dept.  of  Agriculture — letter 
dated  1-21-19. 

b       Report  of  Secretary  of  Agriculture,  1918 — page  8. 
(c)      Average  weight  estimated  at  3  Ibs.  each. 

d       1  Yi  Ibs.  per  doz.  (30  doz.  to  case,  45  Ibs.  to  case). 

(e)  Creamery  and  Dairy. 

(f)  Figures  furnished  by  Bureau  of  Markets,   United  States  Dept.  of  Agriculture — 

letters  dated  1-21-19,  2-18-19. 

(g)  Based  on  estimates  of  Bureau  of  Markets  (Note  a),  95  per  cent  for  creamery  and 

45  per  cent  for  dairy  butter 


It  will  be  seen  from  this  table  that  Swift  &  Company 
handles  only  about  6  per  cent,  of  the  total  poultry,  eggs, 
and  creamery  butter  sold  in  the  United  States.  The 
Trade  Commission  could  undoubtedly  have  obtained  the 
figures  from  other  packers,  and  could  have  arrived  at  an 
accurate  estimate  of  the  proportion  handled  by  the  five 
large  companies.  Since  Swift  &  Company  is  the  largest 
dealer  in  these  commodities,  and  since  two  or  three  of 
the  large  packers  handle  relatively  small  quantities,  it 
would  be  impossible  to  show  more  than  15  or  20 
per  cent,  at  the  outside,  as  the  proportion  handled 
by  the  five  large  packers.  Contrast  this  with  the 
65  per  cent,  mentioned  by  the  Federal  Trade  Com- 
mission, which  is  given  the  semblance  of  authori- 
tativeness  by  its  issuance  by  a  Government  depart- 
ment. Such  disregard  for  accuracy  is  indeed  sig- 
nificant. 


94 

• 

As  for  the  alleged  division  of  territory  in  buying  of 
these  products,  the  fact  that  the  large  packers  do  not 
have  buying  stations  to  any  extent  at  the  same  shipping 
points  is  not  in  any  way  evidence  of  collusion.  The  ex- 
planation for  this  situation  is  the  same  as  that  given  for 
the  location  of  cream-buying  stations,  on  pages  85  and  86, 
above.  The  only  evidence  that  the  Trade  Commission 
offers  that  there  must  be  a  division  of  territory  is  a  let- 
ter reproduced  on  page  156  of  the  Report,  in  which  an 
official  of  Swift  &  Company  refers  to  "each  town  in 
our  territory.  "  This  phrase  means  absolutely  nothing 
so  far  as  division  of  territory  is  concerned;  it  is  merely 
a  common  method  of  referring  to  the  parts  of  the  coun- 
try where  we  habitually  buy  produce. 

Although  the  existence  of  other  firms  in  the  poultry, 
butter,  and  egg  business  is  recognized  on  page  156  of  the 
Report,  the  Federal  Trade  Commission  gives  an  entirely 
wrong  impression  as  to  the  importance  of  these  other  con- 
cerns. As  a  matter  of  fact,  there  are  hundreds  of  large 
dealers  in  these  products,  located  both  in  producing  sec- 
tions, and  in  large  consuming  centers,  and  in  a  great 
many  sections  of  the  country  the  part  played  by  the  large 
packers  is  insignificant  as  compared  with  the  total  busi- 
ness. 

Alleged  Combinations  in  the  Rendering  Business. 


Pages  156     ^Q  Federal  Trade  .Commission  attaches  considerable 

to  158   significance  to  the  fact  that  companies  organized  for  the 

;.       rendering  of  fats  from  dead  animals,  or  from  the  waste 

collected  from  retail  stores,  are  owned  by  the  packing 

interests,  that  these  concerns  have  exclusive  rights  in 

the  markets  where  they  are  located,  and  that  they  have 

made  extortionate  profits. 


95 

So  far  as  rendering  companies  located  at  stock  yards 
are  concerned,  it  is  practically  necessary  for  there  to  be 
only  one  company  at  each  yards  in  order  to  properly  dis- 
pose of  the  dead  animals  that  arrive.  This  is  due  to 
the  fact  that  the  business  is  really  sufficient  to  support 
only  one  company,  and  also  to  the  fact  that  it  is  practically 
impossible  to  get  prompt  and  efficient  service  in  the  col- 
lection and  removal  of  dead  animals  if  there  are  two  or 
more  companies.  For  this  reason  a  rendering  company 
located  at  stock  yards  is  usually  given  the  exclusive  right 
to  buy  all  dead  animals  in  the  yards. 

The  rendering  business  is  not  a  particularly  attractive 
enterprise,  and  one  naturally  wishes  to  obtain  if  pos- 
sible a  little  larger  return  on  his  money  than  he 
would  expect  from  other  investments.  The  larger 
than  normal  profits  that  have  accrued  during  the  past 
two  or  three  years,  however,  have  been  due  prin- 
cipally to  unforeseen  rapid  advances  in  the  prices 
received  for  rendered  fats  between  the  times  that  the 
dead  animals  have  been  bought  and  the  times  that  the 
product  has  been  put  on  the  market.  It  was  impossible 
to  predict  at  the  time  dead  animals  were  being  bought 
that  there  would  be  any  such  increase  in  prices  of  result- 
ing products.  Nevertheless  the  prices  paid  by  rendering 
companies  for  dead  animals  have  substantially  increased 
during  the  war  period,  and  we  do  not  believe  that  impar- 
tial investigation  would  find  any  company  in  wThich  Swift 
&  Company  is  interested  guilty  of  buying  at  unreasonably 
low  prices. 

The  Federal  Trade  Commission  gives  undue  prom- 
inence to  this  matter ;  the  rendering  companies  are  on  the 
whole  very  small,  and  their  business  is  insignificant.  For 
example,  in  the  Congressional  hearings  at  Washington 
it  was  said  that  one  company,  which  is  connected  with 


96 

the  Swift  interests,  made  a  profit  of  60  per  cent,  on  its 
capital.  As  a  matter  of  fact,  the  capital  of  this  company 
was  $25,000,  and  the  profit  was  $15,000;  and  this  busi- 
ness took  care  of  all  the  dead  animals  that  there  were, 
in  connection  with  the  marketing  of  over  2,000,000  head, 
worth  $100,000,000!  It  would  appear  in  this  instance 
that  the  Commission  has  given  undue  prominence  to  a 
trivial  matter. 

At  any  rate,  Swift  &  Company  recognizes  the  fact  that 
ownership  of  rendering  companies,  and  the  exclusive 
manner  in  which  they  must  necessarily  be  allowed  to 
operate,  involves  a  certain  measure  of  power  to  arbitra- 
rily control  prices  of  dead  animals  in  individual  markets, 
and  if  it  could  be  claimed  that  we  have  used  this  power 
unfairly  in  the  past,  we  wish  to  state  that  we  have  already 
taken  definite  steps  to  see  that  no  legitimate  complaint 
can  be  made  against  our  activities  in  this  direction  in 
the  future. 

We  thoroughly  believe  that  through  our  interest  in 
these  companies  we  have  improved  the  methods  of  taking 
care  of  this  disagreeable  feature  of  the  live-stock  indus- 
try, and  that  we  have  thereby  improved  conditions  in  the 
stock  yards ;  it  is  our  sincere  desire  to  operate  such  facil- 
ities to  the  best  interest  of  all  concerned,  and  we  are  only 
too  glad  to  make  any  changes  necessary  with  this  end  in 
view.  All  that  we  want  in  a  matter  of  this  sort  is  impar- 
tial suggestion  and  co-operation,  rather  than  misrepre- 
sentation of  our  motives  and  of  the  facts. 


97 


Formation   of   Wilson   &   Co. — and   the   Sulzberger 
Memoranda. 

The  remainder  of  the  Trade  Commission's  report  con- 
sists almost  entirely  of  an  account  of  the  negotiations 
which  led  to  the  reorganization  of  Sulzberger  &  Sons  Co. 
under  the  name  of  Wilson  &  Co.,  Inc.,  and  of  the  repro- 
duction of  the  so-called  " Black  Book"  of  Mr.  Germon  F. 
Sulzberger. 

Swift  &  Company  does  not  feel  called  upon  to  go  into 
an  exhaustive  explanation  of  these  matters.  We  can  find 
no  evidence  of  illegal  or  illegitimate  practices  in  con- 
nection with  the  reorganization  of  the  Sulzberger  com- 
pany; and  in  the  " Black  Book"  memoranda  we  can  find 
nothing  but  an  occasional  and  informal  exchange  of  views 
and  information  between  Mr.  Sulzberger  and  other  indi- 
vidual packers  at  a  time  when  the  Sulzberger  company 
was  having  financial  difficulties,  and  when  Mr.  Sulzberger 
was  complaining  of  the  aggressive  competition  of  the 
other  packers. 


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